[Federal Register Volume 70, Number 193 (Thursday, October 6, 2005)]
[Proposed Rules]
[Pages 58570-58601]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-20196]



[[Page 58569]]

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Part III





Department of Health and Human Services





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Food and Drug Administration



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21 CFR Part 589



Substances Prohibited From Use in Animal Food or Feed; Proposed Rule

  Federal Register / Vol. 70, No. 193 / Thursday, October 6, 2005 / 
Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 589

[Docket No. 2002N-0273] (formerly Docket No. 02N-0273)
RIN 0910-AF46


Substances Prohibited From Use in Animal Food or Feed

AGENCY:  Food and Drug Administration, HHS.

ACTION:  Proposed rule.

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SUMMARY:  The Food and Drug Administration (FDA) is proposing to amend 
the agency's regulations to prohibit the use of certain cattle origin 
materials in the food or feed of all animals. These materials include 
the following: The brains and spinal cords from cattle 30 months of age 
and older, the brains and spinal cords from cattle of any age not 
inspected and passed for human consumption, the entire carcass of 
cattle not inspected and passed for human consumption if the brains and 
spinal cords have not been removed, tallow that is derived from the 
materials prohibited by this proposed rule that contains more than 0.15 
percent insoluble impurities, and mechanically separated beef that is 
derived from the materials prohibited by this proposed rule. These 
measures will further strengthen existing safeguards designed to help 
prevent the spread of bovine spongiform encephalopathy (BSE) in U.S. 
cattle.

DATES:  Submit written or electronic comments by December 20, 2005. 
Submit written comments on the information collection provisions by 
November 7, 2005.

ADDRESSES: You may submit comments, identified by [Docket No. 2002N-
0273 or RIN 0910-AF46], by any of the following methods:
Electronic Submissions
    Submit electronic comments in the following ways:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Agency Web site: http://www.fda.gov/dockets/ecomments. 
Follow the instructions for submitting comments on the agency Web site.
Written Submissions
    Submit written submissions in the following ways:
     FAX: 301-827-6870.
     Mail/Hand delivery/Courier [For paper, disk, or CD-ROM 
submissions]: Division of Dockets Management (HFA-305), Food and Drug 
Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852.
    To ensure more timely processing of comments, FDA is no longer 
accepting comments submitted to the agency by e-mail. FDA encourages 
you to continue to submit electronic comments by using the Federal 
eRulemaking Portal or the agency Web site, as described in the 
Electronic Submissions portion of this paragraph.
    Instructions: All submissions received must include the agency name 
and Docket No(s). or Regulatory Information Number (RIN) for this 
rulemaking. All comments received may be posted without change to 
http://www.fda.gov/ohrms/dockets/default.htm, including any personal 
information provided. For detailed instructions on submitting comments 
and additional information on the rulemaking process, see the 
``Comments'' heading of the SUPPLEMENTARY INFORMATION section of this 
document.
    Docket: For access to the docket to read background documents or 
comments received, go to http://www.fda.gov/ohrms/dockets/default.htm 
and insert the docket number(s), found in brackets in the heading of 
this document, into the ``Search'' box and follow the prompts and/or go 
to the Division of Dockets Management, 5630 Fishers Lane, rm. 1061, 
Rockville, MD 20852.

FOR FURTHER INFORMATION CONTACT:  Burt Pritchett, Center for Veterinary 
Medicine (HFV-222), Food and Drug Administration, 7519 Standish Pl., 
Rockville, MD 20855, 240-453-6860, e-mail: [email protected].

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
    A. Bovine Spongiform Encephalopathy
    B. Current Animal Feed Safeguards in the United States
    C. Risk of BSE in North America
    D. Additional Measures Considered to Strengthen Animal Feed 
Safeguards
    1. Comments on November 6, 2002 Advance Notice of Proposed 
Rulemaking (ANPRM)
    2. Actions in Response to Washington State Case
    3. Comments on July 14, 2004 ANPRM
II. Proposed Measures to Strengthen Animal Feed Safeguards
    A. FDA Response to Comments to the 2004 ANPRM
    B. Additional Measures to Further Strengthen Feed Protection
    C. Basis for Proposing to Apply Additional Measures to All Animal 
Food and Feed
    D. Cattle Materials Proposed to be Prohibited From Use in All 
Animal Food and Feed
    E. Disposal of Cattle Materials Prohibited in Animal Feed
III. Description of Proposed Rule and Legal Authority
    A. Definitions
    B. Proposed Requirements
    C. Proposed Recordkeeping and Access Requirements
    D. Conforming Changes to 21 CFR 589.2000--Animal Proteins 
Prohibited in Ruminant Feed
    E. Legal Authority
IV. Analysis of Economic Impacts
    A. Summary of Proposed Regulatory Impact Analysis
    B. Need for Regulation
    C. Benefits
    D. Costs
    E. Government Costs
    F. Sensitivity Analysis
    G. Regulatory Flexibility Analysis
V. Paperwork Reduction Act
VI. Environmental Impact
VII. Federalism
VIII. Comments
IX. References

I. Background

A. Bovine Spongiform Encephalopathy

    BSE belongs to the family of diseases known as transmissible 
spongiform encephalopathies (TSEs). In addition to BSE, TSEs also 
include scrapie in sheep and goats, chronic wasting disease (CWD) in 
deer and elk, and Creutzfeldt-Jakob disease (CJD) in humans. The agent 
that causes BSE and other TSEs has yet to be fully characterized. The 
most widely accepted theory in the scientific community is that the 
agent is an abnormal form of a normal cellular prion protein. The 
abnormal form of the prion protein is less soluble and more resistant 
to heat degradation than the normal form. The abnormal prion does not 
evoke any demonstrated immune response or inflammatory reaction in host 
animals. BSE is diagnosed by postmortem microscopic examination of an 
animal's brain tissue and by detection of the abnormal form of the 
prion protein in an animal's brain tissue. There is currently no 
available test to detect the disease in a live animal.
    Since November 1986, there have been more than 180,000 confirmed 
cases of BSE in cattle worldwide. Over 95 percent of all BSE cases have 
occurred in the United Kingdom, where the epidemic peaked in 1992/1993, 
with approximately 1,000 new cases reported

[[Page 58571]]

per week. In addition to the United Kingdom, the disease has been 
confirmed in native-born cattle in 22 European countries and in some 
nonEuropean countries, including Japan, Israel, Canada, and the United 
States.
    Epidemiological studies have characterized the outbreak of BSE in 
the United Kingdom as a prolonged epidemic arising at various 
locations, with all occurrences due to a common source, and have 
suggested that feed contaminated by a TSE agent was the cause of the 
disease outbreak (Ref. 1). The subsequent spread of BSE was associated 
with the feeding of meat-and-bone-meal from rendered BSE-infected 
cattle to non-infected cattle (Ref. 1). It appears likely that the BSE 
agent was transmitted among cattle at an increasing rate by ruminant-
to-ruminant feeding until the United Kingdom ban on such practices went 
into effect in 1988 (Ref. 2).
    Agricultural officials in the United Kingdom have taken a series of 
actions to eliminate BSE. These actions include making BSE a reportable 
disease, banning mammalian meat-and-bone meal in feed for all food-
producing animals, prohibiting the inclusion of animals more than 30 
months of age in the animal and human food chains, and destroying all 
animals showing signs of BSE. As a result of these actions, most 
notably the feed bans, the rate of newly reported cases of BSE in the 
United Kingdom has decreased sharply and continues on a downward trend.
    In 1996, a newly recognized form of the human disease CJD, referred 
to as variant CJD (vCJD), was reported in the United Kingdom. 
Scientific and epidemiological studies have linked vCJD to exposure to 
the BSE agent, most likely through human consumption of beef products 
contaminated with the agent. To date, approximately 150 probable and 
confirmed cases of vCJD have been reported in the United Kingdom, where 
there had likely been a high level of contamination of beef products. 
It is believed that in the United States, where measures to prevent the 
introduction and spread of BSE have been in place for some time, there 
is far less potential for human exposure to the BSE agent. The Centers 
for Disease Control and Prevention (CDC) leads a surveillance system 
for vCJD in the United States. To date, CDC, has not detected vCJD in 
any resident of the United States that had not lived in or traveled to 
the United Kingdom for extended periods of time. In 2002, a probable 
case of vCJD was reported in a Florida resident who had lived in the 
United Kingdom during the BSE epidemic. Epidemiological data indicate 
that the patient likely was exposed to the BSE agent before moving to 
the United States.

B. Current Animal Feed Safeguards in the United States

    In the Federal Register of June 5, 1997 (62 FR 30936) (the 1997 
ruminant feed final rule), FDA published a final rule to provide that 
animal protein derived from mammalian tissues is prohibited for use in 
ruminant feed. Although BSE had not been identified in the United 
States at that time, the 1997 ruminant feed final rule was put in place 
to prevent the establishment and amplification of BSE in the United 
States through animal feed and thereby minimize risk to humans and 
animals. The 1997 ruminant feed final rule created a new Sec.  589.2000 
(21 CFR 589.2000), Animal proteins prohibited in ruminant feed, and 
established a system of controls to ensure that ruminant feed did not 
contain animal protein derived from mammalian tissues. The 1997 
ruminant feed final rule set out requirements for persons who 
manufacture, process, blend, or distribute certain animal protein 
products or ruminant feeds containing such products.
    The 1997 ruminant feed final rule (Sec.  589.2000) prohibits the 
use of mammalian-derived proteins in ruminant feed, with the exception 
of certain proteins believed at that time not to pose a risk of BSE 
transmission. These exceptions to the definition of ``protein derived 
from mammalian tissues'' included: Blood and blood products; gelatin; 
inspected meat products which have been cooked and offered for human 
food and further heat processed for feed (such as plate waste and used 
cellulosic food casings), referred to herein as ``plate waste'' milk 
products (milk and milk protein); and any product whose only mammalian 
protein consists entirely of porcine or equine protein. The 1997 
ruminant feed final rule does not prohibit ruminant animals from being 
fed processed animal proteins derived from nonmammalian species (e.g., 
avian or aquatic animals). The 1997 ruminant feed final rule permits 
the manufacture of non-ruminant feed containing prohibited mammalian 
protein and ruminant feed on the same premises, provided that separate 
equipment is used in the production of ruminant feed or that documented 
adequate clean-out procedures are used between production batches.
    Following the discovery of a BSE positive cow in Washington State 
in December 2003, FDA provided guidance on the use of materials from 
BSE positive cattle. In Guidance for Industry, ``Use of Material from 
BSE Positive Cattle in Animal Feed,'' published in the Federal Register 
in September 2004 (69 FR 58448), FDA stated its view that under section 
402(a)(5) of the Federal Food, Drug, and Cosmetic Act (the act) (21 
U.S.C. 342(a)(5)), animal feed and feed ingredients containing 
materials derived from a BSE-positive animal are considered adulterated 
and should be recalled or otherwise removed from the marketplace.

C. Risk of BSE in North America

    In April 1998, the United States Department of Agriculture (USDA) 
contracted with the Harvard Center for Risk Analysis (HCRA) at Harvard 
University and the Center for Computational Epidemiology at Tuskegee 
University to conduct a comprehensive investigation of the BSE risk in 
the United States. The report, (Ref. 3) widely referred to as the 
Harvard Risk Assessment or the Harvard Study, is referred to in this 
document as the Harvard-Tuskegee Study. The study was completed in 2001 
and released by USDA. Following a peer review of the Harvard-Tuskegee 
Study in 2002, the authors released a revised risk assessment in 2003 
(Ref. 4).
    The Harvard-Tuskegee Study reviewed available scientific 
information related to BSE and other TSEs, assessed pathways by which 
BSE could potentially occur in the United States, and identified 
measures that could be taken to protect human and animal health in the 
United States. The assessment concluded that the United States is 
highly resistant to any proliferation of BSE, and that measures taken 
by the U.S. Government and industry make the United States robust 
against the spread of BSE.
    The Harvard-Tuskegee Study concluded that the most effective 
measures for reducing potential introduction and spread of BSE are as 
follows: (1) The ban placed by USDA's Animal and Plant Health 
Inspection Service on the importation of live ruminants and ruminant 
meat-and-bone meal from the United Kingdom since 1989 and all of Europe 
since 1997 and (2) the feed ban instituted in 1997 by FDA to prevent 
recycling of potentially infectious cattle tissue. The Harvard-Tuskegee 
Study further indicated that, if introduction of BSE had occurred via 
importation of live animals from the United Kingdom before 1989, 
mitigation measures already in place would have minimized exposure and 
begun to eliminate the disease from the cattle

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population even assuming less than complete compliance with the feed 
ban.
    The Harvard-Tuskegee Study also identified pathways or practices 
that, if addressed, would further decrease the already low risk of 
spread BSE if it were introduced into the United States. These include 
the following: (1) Failing to comply with FDA's ruminant feed 
regulations that prohibit the use of certain proteins in feed for 
cattle and other ruminants; and (2) rendering of animals that die on 
the farm (considered the highest risk cattle), and then incorporating 
(through illegal diversion or cross-contamination) the rendered product 
in ruminant feed. The Harvard-Tuskegee Study's independent evaluation 
of the potential additional risk mitigation measures predicts that a 
prohibition against rendering of animals that die on the farm would 
reduce potential new cases of BSE in cattle following a hypothetical 
introduction of 10 infected animals by 80 percent (from 4.3 to 0.77 
cases) as compared to the base case scenario, (i.e., present state of 
the U.S. cattle population, along with government regulations and 
prevailing agricultural practices, and an assumption of less than 
complete compliance with the feed ban) (Ref. 4). Further, the study 
evaluated the impact of a specified risk materials (SRMs) ban that 
would prohibit high risk materials such as the brain, spinal cord, 
vertebral column and animals that die on the farm, from inclusion in 
human and animal food. The analysis predicts that this measure would 
reduce potential new BSE cases in cattle following a hypothetical 
introduction of ten infected animals by 90 percent (from 4.3 to 0.53 
cases).
    In 2003, following the detection of BSE in a native-born cow in 
Canada, the HCRA evaluated the implications of a then-hypothetical 
introduction of BSE into the United States (Ref. 5), using the same 
simulation model developed for the initial Harvard-Tuskegee Study. The 
results of this assessment were consistent with the conclusions of the 
earlier study--namely, that the United States presents a very low risk 
of establishing or spreading BSE should it be introduced.
    On December 23, 2003, USDA announced that a dairy cow in Washington 
State had tested positive for BSE. The results were confirmed on 
December 25, 2003, by the Veterinary Laboratories Agency in Weybridge, 
England. Immediately after the diagnosis was confirmed, USDA, FDA, and 
other Federal and State agencies initiated an epidemiological 
investigation (Ref. 6), and began working together to trace any 
potentially infected cattle, trace potentially contaminated rendered 
product, increase BSE surveillance, and take additional measures to 
address risks to human and animal health. The epidemiological 
investigation and DNA test results confirmed that the infected cow was 
born and most likely became infected in Alberta, Canada, before 
Canada's 1997 implementation of a ban on feeding mammalian protein to 
ruminants.
    On January 22 through 24, 2004, the Secretary of Agriculture 
convened an international panel of experts on BSE. The panel, referred 
to as the International Review Team (IRT), was asked to: (1) Assess the 
epidemiological investigation conducted in response to the BSE case in 
Washington State, (2) provide expert opinion about when the active 
phase of the investigation should be terminated, (3) consider the 
response actions of the United States to date, and (4) provide 
recommendations about actions that could be taken to provide additional 
meaningful human or animal health benefits in light of the North 
American experience. The IRT provided its report on February 4, 2004.
    In May 2004, USDA contracted with HCRA to update the BSE risk 
assessment model to reflect its January 2004 rulemaking to prohibit 
SRMs and certain other cattle material in human food. HCRA was also 
asked to update the parameters in the model for compliance with FDA's 
feed ban. HCRA was also asked to model the impact that the IRT 
recommendation would have on the BSE risk to humans and cattle.
    In December 2004, Canada announced that a third North American cow 
tested positive for BSE. An ongoing epidemiologic investigation found 
that this animal, an 8-year-old, nonambulatory dairy cow, originated in 
Alberta, Canada and was born before the Canadian feed ban went into 
effect in August 1997. Shortly thereafter, in January 2005, another cow 
in Alberta was found to be positive for BSE. This case involved a beef 
cow born in March 1998, 6 months after the Canadian feed ban went into 
effect. Based on preliminary information, Canada believes that the most 
likely source of infection in this animal was feed produced before 
implementation of Canada's feed ban (Ref. 7).
    In June 2005, USDA announced that a 12-year-old beef cow, born and 
raised in Texas, was confirmed BSE positive. The BSE-positive cow most 
likely became infected before FDA's implementation of the 1997 ruminant 
feed final rule. It was determined that no part of the animal entered 
the human food or animal feed chains.

D. Additional Measures Considered to Strengthen Animal Feed Safeguards

1. Comments on November 6, 2002, Advance Notice of Proposed Rulemaking 
(ANPRM)
    In the Federal Register of October 5, 2001 (66 FR 50929), FDA 
announced its plan for an October 30, 2001 public hearing in Kansas 
City, MO, to solicit comments from the public on the 1997 ruminant feed 
regulation. Recognizing that new information had emerged since 
publication of the feed rule in 1997, FDA requested comments on whether 
changes to the rule or other additional measures were necessary (Ref. 
8). Information obtained from the public hearing and from the Harvard-
Tuskegee Study was used in the publication of an ANPRM (2002 ANPRM) in 
the Federal Register of November 6, 2002 (67 FR 67572). This ANPRM 
sought comment from affected industries and the public on possible ways 
to strengthen the 1997 ruminant feed regulation. The ANPRM specifically 
asked for comments on a number of questions related to the following 
five aspects of the BSE feed regulation: (1) Excluding brain and spinal 
cord from rendered animal products, (2) prohibiting the use of poultry 
litter in cattle feed, (3) assessing the improper use of pet food as a 
feed for ruminants, (4) preventing cross-contamination, and (5) 
eliminating the plate waste exemption.
    The predominant view of those who submitted comments in response to 
the ANPRM was that the BSE risk in the United States was low enough 
that no new feed controls were needed. Most said that the current feed 
ban provided more than adequate protection against BSE, that there was 
no scientific justification for additional regulations, that compliance 
with the 1997 ruminant feed final rule was extremely high, and that 
over 19,900 USDA surveillance samples in 2002 alone failed to detect 
BSE in U.S. cattle. They also cited the Harvard-Tuskegee Study 
conclusion that existing control measures made the risk to U.S. cattle 
and to U.S. consumers from BSE very low.
    In the 2002 ANPRM, FDA said that the Harvard-Tuskegee Study 
identified the removal of high-risk bovine tissues, such as brain, 
spinal cord, intestine, and eyes, from human food and from rendered 
material for all animal feed as a way to reduce the potential exposure 
of cattle and humans to the BSE agent. The 2002 ANPRM then asked for 
comments on the following three questions related to SRMs: (1) Should 
high risk materials be excluded from rendered products?; (2) how 
feasible would it be for the rendering industry

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to implement such an exclusion?; and (3) what will be the adverse and 
positive economic, environmental, and health impacts from an exclusion?
    Comments in support of an SRM ban included one comment from USDA 
citing conclusions from the Harvard-Tuskegee Study that this action 
would significantly reduce the amount of infectivity in the animal feed 
chain, and would reduce risks resulting from ``leaks'' in the feed ban. 
Other comments stressed the infectivity of these tissues, and the 
recommendation by the World Health Organization (WHO) that countries 
exclude these tissues from the animal and human food chain (Ref. 9).
    Comments opposing an SRM ban said that the measure would be 
redundant because the 1997 ruminant feed final rule already prohibits 
this high-risk material in ruminant feed. Therefore, the ban would only 
be beneficial if BSE were present in the United States and there were 
significant non-compliance with the feed ban. The comments also cited 
the conclusions of the Harvard-Tuskegee Study that the risks of BSE in 
the United States are low. One comment said that restrictions on SRMs 
in animal feed should be decoupled from restrictions for human food 
because of the substantial reduction in infectivity obtained during 
rendering. Another comment said that an SRM ban would give only the 
perception of a risk reduction, not a real reduction, and that it would 
send the message to our trading partners that our BSE risks are such 
that more controls are needed. Australia asked that, if an SRM ban is 
implemented, the ban not apply to Australia because of its widely 
recognized status as a low-risk BSE country.
    Numerous comments addressed the feasibility and the adverse 
economic impacts of an SRM ban. One comment pointed out that it is not 
feasible to remove central nervous system (CNS) tissue from decomposing 
carcasses. Comments from a trade association said that an SRM ban would 
require costly restructuring of facilities that would force many small 
rendering plants out of business, depriving some parts of the country 
access to rendering as a means of animal disposal. A June 2002 Sparks 
Report estimated disposal costs of an SRM ban to be $54 million, based 
on the assumption that the ban would apply to all cattle because of the 
difficulty of determining the age of cattle at slaughter (Ref. 10). 
According to an earlier 1996 Sparks Report, the cost of disposal of 1.7 
billion pounds of CNS tissue and dead stock would exceed $400 million. 
Another estimate for disposal was $50 million for the beef industry 
alone. One comment said that feed costs account for 70 percent of 
poultry production cost, and that renderers would pass on the costs of 
excluding brains and spinal cords to the poultry industry.
    Several comments mentioned the environmental impact of an SRM ban. 
One comment stated that a total ban on SRMs in rendered animal products 
would create a waste stream with no economic value. Another comment 
said that a ban on SRMs would encourage improper disposal of dead stock 
because there are no federal regulations on disposal of dead animals.
2. Actions in Response to Washington State Case
    In response to the BSE case identified in Washington State, USDA 
published an interim final rule in the Federal Register of January 12, 
2004 (69 FR 1861), excluding high-risk tissues from human food. The 
interim final rule prohibited the use of SRMs and certain other cattle 
material in USDA-regulated human food. USDA defined SRMs as brain, 
skull, eyes, trigeminal ganglia, spinal cord, vertebral column 
(excluding the vertebra of the tail, the transverse processes of the 
thoracic and lumbar vertebrae, and the wings of the sacrum), and dorsal 
root ganglia (DRG) of cattle 30 months of age and older, and the 
tonsils and distal ileum of the small intestine of cattle of all ages. 
To ensure effective removal of the distal ileum, USDA requires that the 
entire small intestine be removed and disposed of as inedible product. 
In its January 12, 2004, interim final rule, USDA took the additional 
step of making cattle that are unable to rise from a recumbent 
position, referred to in this document as nonambulatory disabled 
cattle, ineligible to be slaughtered for human consumption.
    On January 26, 2004, FDA announced its intention to implement 
additional measures to strengthen existing BSE safeguards for FDA-
regulated products. These measures included the issuance of an interim 
final rule to implement additional measures related to animal feed. The 
interim final rule would have implemented four specific measures 
related to animal feeds. These measures included the elimination of the 
exemptions for blood and blood products and ``plate waste'' from the 
1997 ruminant feed rule, a prohibition on the use of poultry litter in 
ruminant feed, and a requirement for dedicated equipment and facilities 
to prevent cross-contamination.
    However, on February 4, 2004, IRT released its report on measures 
related to BSE in the United States. The report recommendations 
included a somewhat different set of measures for reducing the risks 
associated with animal feed than the measures FDA had announced that it 
intended to implement through an interim final rule. Although FDA 
believed its previously announced measures would serve to reduce the 
already small risk of BSE spread through animal feed, the broader 
measures recommended by the IRT, if implemented, could make some of the 
previously announced measures unnecessary. FDA believed that additional 
information was needed to determine the best course of action in light 
of the IRT recommendations and decided to publish an ANPRM, which 
requested comments on the recommendations of the IRT, as well as on 
other measures under consideration to protect the animal feed supply.
    Consistent with measures implemented by USDA to exclude high-risk 
cattle tissues from human food (69 FR 1861), FDA published an interim 
final rule on July 14, 2004 (69 FR 42255), prohibiting a similar list 
of risk materials from FDA-regulated human food, including dietary 
supplements, and cosmetics.
3. Comments on July 14, 2004, ANPRM
    In the Federal Register of July 14, 2004 (69 FR 42287), FDA 
published an ANPRM (2004 ANPRM) jointly with USDA in which FDA 
announced its tentative conclusion that it should propose banning SRMs 
in all animal feed. In this ANPRM, FDA asked for comment on this 
measure and also on the IRT's recommendations to require dedicated 
equipment or facilities for feed manufacture and transport, and its 
recommendation to prohibit the use of all mammalian and poultry protein 
in ruminant feed. Finally, FDA also asked for comment on the set of 
measures that the agency had announced in January 2004. Comments 
submitted in response to the 2004 ANPRM that relate to SRMs are 
summarized in sections I.D.3a through I.D.3f by general topic area.
    a. Need for SRM ban. As with the comments received in response to 
the 2002 ANPRM, many comments questioned the need for an SRM ban at the 
time of the 2004 ANPRM. Several comments argued that the comparison 
made by the IRT between the BSE situations in Europe and the United 
States is inappropriate. One reason given for the invalid comparison 
was that there were an estimated 3 to 4 million undiagnosed BSE cases 
in the United Kingdom, compared to two diagnosed cases in North America 
in cattle born before feed restrictions were implemented. Another 
comment said

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that the United States did, in fact, learn from the European experience 
and implemented controls early so that potential animal exposure to the 
BSE agent in the United States remains exceedingly small compared to 
the massive exposure in the United Kingdom. One comment submitted by 
the agriculture department of a state with a large agriculture industry 
said that its findings from 600 inspections do not support the premise 
of the IRT's recommendation that an SRM ban is needed to address 
problems of cross-contamination and on-farm misfeeding. The state 
indicated that, in these inspections, it did not observe any prohibited 
materials or feed containing prohibited materials on farms where 
ruminant feeds were being mixed.
    Other comments said that the reduction in risk obtained through an 
SRM ban would be minimal, mostly citing the effectiveness of the 
current firewalls in reducing BSE infectivity in the cattle population. 
One comment said that the Harvard-Tuskegee Study conclusion that an SRM 
ban will reduce potential cattle exposure to BSE infectivity by 88 
percent sounds more impressive than it really is. Reducing a very small 
risk by 88 percent does not necessarily provide significant risk 
reduction.
    Finally, many comments questioned FDA's decision to ban SRMs from 
animal feed before the results of USDA's enhanced BSE surveillance 
program are known. USDA's one-time effort to test as many high-risk 
cattle as possible was started on June 1, 2004, and was expected to be 
completed by the end of 2005. One comment pointed out that the IRT's 
recommendations for defining SRMs are predicated on the outcome of this 
aggressive surveillance program.
    In support of FDA's tentative conclusion that it should propose to 
ban SRMs from all animal feed, many comments cited the conclusion of 
the Harvard-Tuskegee Study that an SRM ban will provide additional risk 
reduction, and also cited the recommendation of the IRT that SRMs 
should be excluded from all animal feed, including pet food. One 
comment said that an SRM ban would restore confidence in U.S. beef 
exports.
    b. Definition of SRMs. SRMs are typically defined as the tissues in 
which BSE infectivity has been demonstrated in experimentally or 
naturally infected animals. SRMs are further defined by the OIE 
Terrestrial Animal Health Code based on the age of the animal and the 
BSE risk status of a country. In the 2004 ANPRM, FDA asked how SRMs 
should be defined for animal feed, specifically, if the SRM list should 
be the same list as for human food. FDA also asked what information is 
available to support having two different lists.
    Comments from one organization included data from the Harvard-
Tuskegee Report on the relative infectivity of specific tissues. These 
data were based on pathogenesis studies carried out in the United 
Kingdom and showed the fraction of total infectivity of each tissue to 
be: Brain 64.1 percent; spinal cord 25.6 percent; dorsal root ganglia 
3.8 percent; trigeminal ganglia 2.6 percent; distal ileum 3.3 percent; 
tonsil <0.1 percent; and eyes <0.1 percent. The comment used the data 
to make the point that 90 percent of infectivity could be removed by 
excluding only the brain and spinal cord. A different comment citing 
the same data pointed out that the infectivity distribution represents 
more than a worst case scenario because, in the pathogenesis study, the 
BSE dose administered orally to calves was substantially greater than 
would reasonably be expected under field conditions. This second 
comment went on to point out that FDA's interim final rule on food and 
cosmetics said that in cattle infected under field conditions, BSE 
infectivity had been demonstrated only in the brain, spinal cord, and 
retina of the eye at the end stages of the disease.
    Many comments recommended that the human food list of SRMs be used 
to define which SRMs should be excluded from animal feed. Several 
comments recommended expanding the list beyond the human food list by 
applying it to tissues from cattle 12 months of age or older, or to 
tissues from all cattle. Others advocated eliminating bovine or animal 
protein from ruminant feed altogether. Reasons given by the comments 
for these recommendations were the large risk reduction that could be 
achieved and the desirability of being consistent with the requirements 
for human food.
    Those who submitted comments in support of a more limited SRM list 
mostly did so to minimize the volume of material that would require 
nonfeed disposal. The comments stated that reducing this volume of 
material that would require nonfeed disposal would lessen the adverse 
impact of an SRM ban on the livestock, meat, and animal feed 
industries. One company used the Harvard model to simulate three 
different SRM scenarios and then submitted data showing that limiting 
the SRM list to brain and spinal cord (while also prohibiting use of 
dead stock and downers over 30 months of age), eliminating vacuum 
rendering, and keeping the existing feed ban in place, achieved a risk 
reduction equivalent to that obtained by banning the full human list of 
SRMs.
    The following are other suggestions provided in comments submitted 
in response to the 2004 ANPRM for reducing the volume of SRM material 
needing alternative disposal: (1) Allow the use of SRMs from animals 
that test negative for BSE, (2) designate only the head as an SRM which 
reduces by 64 percent the potential BSE infectivity in feed, (3) allow 
the use of intestines from veal calves whose carefully controlled diets 
consist of low-risk formulas, and (4) allow mechanically separated beef 
from pet food plants to be used if SRMs are removed before meat is 
mechanically separated from bones.
    c. Cattle not inspected and passed for human consumption. The term 
``cattle not inspected and passed for human consumption'' is used in 
this document to mean cattle that were not inspected and passed for 
human consumption by the appropriate regulatory authority. For the 
purposes of this document, this term also includes nonambulatory 
disabled cattle, i.e., cattle that could not rise from a recumbent 
position or that could not walk, including, but not limited to, those 
with broken appendages, severed tendons or ligaments, nerve paralysis, 
fractured vertebral column, or metabolic conditions. This proposed 
definition is consistent with the use of the terms ``inspected and 
passed and nonambulatory disabled cattle'' as defined in USDA's interim 
final rule on human food (69 FR 1862) and FDA's interim final rule on 
human food and cosmetics (69 FR 42255). For the purposes of this 
proposed rule, nonambulatory disabled cattle are included in the 
definition of cattle not inspected and passed, since nonambulatory 
disabled cattle cannot be passed for human consumption.
    A number of questions were included in the 2004 ANPRM regarding the 
use of materials from cattle not inspected and passed for human 
consumption as previously defined. Comments received discussed both the 
advantages and disadvantages of excluding these animals from being 
rendered for use in animal feed.
    Advantages mentioned included the additional risk reduction that 
would be provided by the measure. A number of comments cited the 
Harvard-Tuskegee Study, which showed that removing dead stock from the 
feed chain would reduce potential exposure of cattle to the BSE agent 
by 88 percent. However, other comments noted that such a ban would 
result in dead stock being disposed of on the farm, impacting USDA's 
surveillance program and

[[Page 58575]]

increasing environmental problems due to improper disposal of animal 
carcasses. Concerns were also expressed about lack of infrastructure 
for non-feed disposal of dead stock, and the serious economic impact of 
diverting these animals to alternative disposal.
    In response to the question in the 2004 ANPRM about effective 
removal of SRMs from dead stock and nonambulatory disabled cattle, 
several comments stated that such removal would not be economically or 
technically feasible. Other comments stated that SRM material could be 
effectively removed because there is no substantial difference between 
the processing of dead and nonambulatory animals at rendering 
facilities and the processing of healthy cattle at slaughter plants. 
One other comment mentioned instances where some USDA-inspected 
deboning facilities already remove SRMs from dead cattle at the request 
of pet food manufacturers. This comment also said that, based on their 
experience, SRMs can be removed from dead cattle in all but the hottest 
months of the year when the rate of decomposition increases. Another 
comment said that removing SRMs from dead stock may increase exposure 
of plant employees to pathogens and zoonotic diseases.
    One comment noted that the European experience has shown that 
cattle at highest risk for BSE are dead cattle, downer cattle, and 
ante-mortem condemned cattle over 30 months of age. This comment said 
that, while it is possible to remove the meat from these carcasses for 
use in pet food, they are not aware of any way of verifying the removal 
of SRMs from dead and nonambulatory cattle (short of active government 
oversight) that would allow this material to be rendered for use in 
feeds for non-ruminant animals. Another comment suggested that as an 
option for reducing the amount of material for disposal, dead stock 
under 30 months of age be allowed to be rendered for feed use. This 
comment also said that USDA could test dead stock over 30 months of 
age, allowing material from negative animals to be used in feed.
    d. Small intestine. The 2004 ANPRM also requested information to 
evaluate the IRT recommendation that the entire intestine from cattle 
of all ages should be excluded from the human and animal food chains. 
With publication of its interim final rule on January 12, 2004, USDA 
required that the entire small intestine be disposed of as inedible. 
Likewise, FDA prohibited the use of the entire small intestine in FDA-
regulated human food and cosmetics, even though the agency only 
considers the distal ileum portion of the small intestine to be a 
specified risk material (69 FR 42259).
    However, based on comments received in response to the FDA interim 
final rule on human food and cosmetics, FDA concluded that processors 
have the technology to effectively remove the distal ileum portion from 
the rest of the small intestine. Thus, FDA amended the human food and 
cosmetics interim final rule to state that the small intestine is not 
considered prohibited cattle material if the distal ileum is removed by 
a procedure that removes at least 80 inches of the uncoiled and trimmed 
small intestine as measured from the caeco-colic junction and 
progressing proximally towards the jejunum or by a procedure that the 
establishment can demonstrate is equally effective in ensuring complete 
removal of the distal ileum (70 FR 53063, September 7, 2005). This 
amendment is consistent with USDA requirements (70 FR 53043, September 
7, 2005).
    Many comments in response to the 2004 ANPRM stated that inclusion 
of the entire small intestine from cattle less than 30 months of age in 
the list of prohibited material would double the volume of SRMs from 
slaughter requiring alternative disposal while only marginally 
decreasing infectivity. Several comments stated that only the distal 
ileum should be included in the list of SRMs and noted that it is 
easily identified for separation at slaughter.
    One comment questioned the need to designate the intestinal tract 
as SRM, pointing out that the distal ileum accounts for only 5 percent 
of infectivity, which is reduced by two logs during rendering. Another 
comment said that it was unnecessary to designate any portion of the 
intestinal tract of cattle less than 30 months of age as SRM because 
these animals were born 4 1/2 years after the feed ban was implemented, 
and are therefore low risk animals. Several comments said that, if 
packers can demonstrate a satisfactory technique, they should be 
allowed to remove only the distal ileum rather than the entire small 
intestine.
    One comment expressing concern about the BSE risk associated with 
bovine intestines said that research in the United Kingdom found 
positive immunostaining for the resistant form of the prion protein 
along the length of the intestine, which provides evidence that the 
entire intestine should be considered SRM.
    e. Infrastructure for alternative disposal. We received a number of 
comments addressing the issue of disposal infrastructure. One comment 
noted that the IRT recognized that an infrastructure was not in place 
to dispose of SRM material and that the IRT had suggested that a staged 
implementation may be necessary to allow this infrastructure to 
develop. One comment said that before an SRM ban is implemented a 
comprehensive plan for disposal of this material needs to be developed. 
Another comment noted that in Texas, SRMs are considered special waste, 
and that no landfill in the state is capable of accommodating a large 
volume of this material. Additional comments indicated that this 
concern was also true for other states, including Nebraska and Utah.
    Two organizations submitted slaughter and cattle mortality data to 
emphasize the amount of waste that would be generated by regulations 
that would exclude this material from being rendered for use in animal 
feed. One of these organizations said that it is deeply concerned that 
FDA fails to recognize that a suitable disposal infrastructure does not 
exist to deal with the very large quantities of SRMs that would be 
generated on a daily basis. Its estimate for the volume of waste 
generated from slaughter and cattle mortalities was 2 billion pounds 
per year. The other organization submitted similar comments saying that 
the U.S. system is currently unprepared to manage the waste disposal 
challenges certain to arise if significant quantities of livestock 
mortalities and slaughter byproducts require disposal by means other 
than rendering. The comments further stated that the disposal and 
environmental challenges resulting from the ban would be faced 
immediately, but the solutions to these challenges would arise only 
after significant time and financial investment across the livestock 
sector. The comments also said that there is an absence of direct 
regulatory control over alternative methods of disposing of the 
enormous quantities of this unpleasant material.
    Another comment suggested that renderers should be allowed to 
dedicate lines to SRM material and SRM-free material within a single 
facility. Equipment for receiving, grinding, cooking, processing, and 
conveying could be dedicated lines, while the facility itself, 
including the utilities, odor control, and wastewater treatment systems 
be shared. Further, another comment suggested FDA work with the 
rendering industry to develop cleanout procedures that would allow a 
plant to process both SRMs and SRM-free material. These procedures 
would be helpful to allow for seasonal deer rendering, for cleaning up 
after accidental cross-contamination, and for

[[Page 58576]]

converting a facility back to SRM-free rendering.
    One comment addressed the use of rendered SRM material as an 
alternative fuel source for cement kilns, indicating that ruminant meat 
and bone meal and fat are being used as a fuel source in Europe and 
Japan. According to the comment, these materials burn efficiently, and 
the heat from the kiln leaves virtually no organic residue.
    f. Verification of SRM removal and SRM marking. One comment stated 
that, in the absence of a practical test for verification of SRM 
removal, the documentation required by HACCP plans should be sufficient 
to show that SRMs at slaughter are excluded from animal feed channels. 
Thus, inspections of records could be used to verify SRM removal. Also, 
the comment stated that FDA can verify SRM removal by shifting 
resources from inspections of thousands of feed mills and farms to the 
much smaller number of slaughter plants and renderers.
    One comment stated that rendering plants are capable of keeping raw 
materials from various sources separated and capable of using 
production, inventory, and shipping records to document the movement of 
both SRM and SRM-free materials. Such management practices can be 
verified by inspection, much like those conducted at USDA-inspected 
cattle slaughter facilities. The comment went on to say that, if a 
rendering plant is dedicated to rendering only SRMs, such a plant will 
have to be inspected to determine how it disposes of SRMs.
    Two comments suggested that raw or SRM-derived rendered materials 
can be effectively marked using automatic dosage pumps to dispense 
markers like glyceroltriheptanoate (GTH). GTH is a C7 synthetic fatty 
acid not found in nature. A gas chromatography (GC) method for its 
detection is available. Charcoal was mentioned as another potential 
marker for use in rendered products.

II. Proposed Measures to Strengthen Animal Feed Safeguards

A. FDA Response to Comments to the 2004 ANPRM

    FDA agrees with the numerous comments saying that it is important 
to keep the BSE risk in the United States in proper perspective. FDA 
acknowledges that the risk is likely low, and acknowledges that it is 
inappropriate to compare the BSE situation in the United States to the 
situation in Europe. However, FDA disagrees with comments concluding 
that for these reasons no additional measures are needed. Even though 
strong control measures have been put in place and compliance with the 
current BSE feed regulation is high by renderers, protein blenders and 
feed mills, the Agency is concerned, as discussed further below, about 
such issues as the presence of high risk material in the non-ruminant 
feed supply and cross-contamination of ruminant feed during the 
rendering or feed manufacturing process. For example, without fully 
dedicated equipment, it may not be possible to verify that there is 
zero carryover of feed or feed ingredients in equipment, even where a 
firm's cleanout procedures have been judged to be adequate. In 
addition, resource constraints limit FDA's ability to assure full 
compliance by all segments of the industry that are subject to the 
current BSE feed regulation. For example, resources are not available 
to the FDA and its state counterparts to fully verify compliance on 
over 1 million farms where cattle are being fed.
    FDA does not agree with comments that the agency should wait until 
USDA completes its enhanced BSE surveillance program before deciding if 
additional feed controls are needed. As stated in the July 2004 ANPRM, 
FDA had tentatively decided based on clear evidence that the BSE agent 
had been introduced into the North American animal feed supply, and 
based on the recommendation of the IRT, that SRMs should be removed 
from all animal feed. Results from the enhanced surveillance that was 
being conducted concurrent with our rulemaking process indicated that 
BSE had been introduced into the United States, but was present at a 
very low level. These results reinforced FDA's decision that the 
measures being proposed are appropriate.
    With respect to the definition of SRMs, FDA agrees that prohibiting 
the full list of SRMs would achieve greater risk reduction than 
prohibiting a partial list, but also agrees with comments saying that 
the infrastructure does not currently exist to handle the volume of 
material that would require non-feed disposal if the full list of SRMs 
were diverted from animal feed use. Therefore, FDA agrees that focusing 
on brain and spinal cord is an effective approach for achieving 
additional animal and public health protection while minimizing the 
economic, environmental, and public health concerns associated with 
disposal of the full list of SRMs. FDA, however, seeks comments on 
whether a full SRM ban is warranted.
    Comments were mixed on the feasibility of removing SRMs from dead 
stock. FDA therefore concluded that some firms would elect to remove 
SRMs and render the remainder of the carcass, and that this could 
lessen difficulties associated with alternative disposal. FDA does not 
agree that allowing test-negative animals to be rendered for animal 
feed use is appropriate. Unlike Europe, rapid screening tests in the 
United States have been used only for surveillance purposes. These 
tests have not been used as food or feed safety tests because currently 
available tests can detect BSE only in the late stages of disease. 
Finally, although FDA agrees that vacuum rendering is less effective at 
inactivating TSEs than atmospheric rendering, the Agency disagrees that 
vacuum rendering should be prohibited. Modeling results submitted with 
the comment showed that such a prohibition would result in an 
additional one percent reduction in risk. In light of other measures 
being proposed and the fact that few plants use vacuum rendering, FDA 
does not believe that prohibiting this rendering process would 
appreciably improve animal or public health protection.

B. Additional Measures to Further Strengthen Feed Protection

    The United States and Canadian feed regulations implemented in 1997 
were necessary because of uncertainty about whether BSE infectivity had 
already been introduced into North America before new import 
restrictions on live cattle and meat and bone meal from Europe were put 
in place. It is now clear from the five North American BSE cases that 
the BSE agent was introduced into the North American animal feed supply 
at some point in time. While FDA continues to believe that compliance 
with the feed regulation has provided strong protection against the 
spread of BSE, the agency believes that the recent cases are an 
indication that additional animal feed protections are needed to remove 
residual infectivity that may be present in the animal feed supply. FDA 
also believes that of all the options considered since publication of 
the 2002 ANPRM, excluding the highest risk tissues from all animal feed 
is the best approach to address the risks of BSE in the United States. 
In the 2004 ANPRM, FDA announced its tentative conclusion that it 
should propose a prohibition on the use of SRMs in all animal feed.
    The decision to propose banning SRMs from all animal feed led to 
the following questions: (1) Which material to exclude, (2) what 
alternative disposal methods could be used, (3) what the economic and 
environmental impacts of diverting material to alternative disposal 
would be, and (4) how an SRM ban could be enforced. As the IRT 
reported,

[[Page 58577]]

exclusion of large volumes of raw material is a massive burden for all 
countries affected by BSE. FDA received valuable information pertaining 
to these issues in comments submitted in response to the 2004 ANPRM.
    In reaching a decision about what specific additional measures 
should be proposed at this time, FDA considered the magnitude of the 
BSE risk in the United States. While the recent North American cases 
clearly show the BSE agent was introduced, the USDA enhanced BSE 
surveillance program indicates that the prevalence of the disease in 
the United States is very low. As of July 2005, USDA has tested over 
418,000 high-risk cattle under its enhanced BSE surveillance program 
(Ref. 11), and has found one positive animal in addition to the cow 
identified in Washington State in December 2003. Therefore, FDA 
believes that the additional measures being proposed are appropriate at 
this time. The agency proposes to prohibit from use in all animal feed 
the brains and spinal cords from cattle 30 months of age and older, the 
brains and spinal cords from all cattle not inspected and passed for 
human consumption, and the entire carcass of cattle not inspected and 
passed for human consumption from which brains and spinal cords were 
not removed. The agency also proposes to prohibit from use in all 
animal feed mechanically separated beef and tallow that are derived 
from materials prohibited by the rule. However, the rule proposes to 
exempt tallow from this requirement if it contains no more than 0.15 
percent insoluble impurities.

C. Basis for Proposing to Apply Additional Measures to All Animal Food 
and Feed

    The current U.S. ruminant feed regulation prohibits the use of 
certain mammalian-origin proteins in ruminant feed, but allows the use 
of these materials in feed for non-ruminant species. FDA believes that 
the presence of high-risk materials in the non-ruminant feed supply 
presents a potential risk of BSE to cattle in the United States. 
European experience showed that, in countries with high levels of 
circulating BSE infectivity, controls on only ruminant feed were not 
sufficient to prevent further transmission of BSE. Until SRMs were 
removed from all animal feed, a significant number of new cases 
continued to be found in cattle born in the United Kingdom after 
implementation of a ruminant-to-ruminant feed ban (Ref. 12). These new 
cases were attributed to either cross-contamination during feed 
manufacture and transport, or to intentional or unintentional 
misfeeding on the farm.
    The 1997 ruminant feed regulation requires feed manufacturers and 
distributors that handle both ruminant feed and feed ingredients and 
materials prohibited in ruminant feed to control cross-contamination by 
either: (1) Maintaining separate equipment or facilities or (2) using 
adequate clean-out procedures or other means adequate to prevent carry-
over of prohibited material into feed for ruminant animals. FDA has 
been concerned about the adequacy of such clean-out procedures and 
sought public comment on this issue in the 2002 ANPRM. Although many 
firms using the clean-out option have written procedures in place, 
evaluating their adequacy is difficult because of wide variation in 
equipment and practices used by the feed industry, and because there is 
currently no definitive test method to detect prohibited proteins.
    Further increasing FDA's concerns about cross-contamination are 
preliminary data from an unpublished study showing that the minimum 
infectious dose for BSE may be lower than previously thought. Interim 
results at approximately 5 years post exposure of an oral challenge 
experiment have demonstrated transmission of BSE to 1 out of 15 animals 
that received 0.01 gram of brain tissue from a BSE-infected animal 
(Ref. 13). The lowest dose previously tested was 1.0 gram of brain 
tissue which showed transmission of BSE in 7 out of 10 animals in the 
trial group. This finding of a lower minimum infectious dose for BSE 
would suggest that the risk from cross-contamination is greater than 
previously thought. We seek comment on this interpretation of theses 
interim results.
    Instances of cattle being exposed to prohibited material through 
noncompliance with the 1997 feed bans have been identified in both 
Canada and the United States. The investigation by the Canadian Food 
Inspection Agency of the BSE case identified in May 2003 found several 
instances where cattle might have had access to non-ruminant feed 
containing prohibited material. In the United States, FDA inspections 
have identified situations where cattle could have been exposed to 
material prohibited in ruminant feed as a result of ruminant feed being 
contaminated with non-ruminant feed, or non-ruminant feed not being 
properly labeled.
    In fiscal year 2004 and the first half of fiscal year 2005, federal 
and state inspections identified 41 instances (0.4 percent of 
inspections) of cross-contamination or commingling problems in firms 
that handle animal feeds containing prohibited mammalian protein (Ref. 
14). During this same period, inspections identified 165 instances (1.7 
percent of inspections) in which non-ruminant feeds containing 
prohibited material were not properly labeled with the caution 
statement ``Do Not Feed to Cattle or Other Ruminants''. Firms receiving 
mislabeled feed would not be aware of the need to take steps to prevent 
cross-contamination of ruminant feed with such products. Furthermore, 
inspections during this period identified 604 instances (6.3 percent of 
inspections) in which firms handling animal feeds containing prohibited 
mammalian protein did not meet the recordkeeping requirements. These 
instances involved a variety of recordkeeping deficiencies, including 
not maintaining sales records for feeds received or distributed, not 
establishing written protocols for avoiding commingling, and not fully 
documenting clean-out measures utilized. Such deficiencies are 
typically corrected by the involved firms without further action by the 
agency. However, the occurrence of these deficiencies nonetheless 
supports the need for additional measures to address concerns about the 
presence of high-risk materials in the non-ruminant feed supply. 
Without sales records, it is difficult to verify the source of feed or 
feed ingredients or to track distributed feeds when conducting recalls 
in response to known instances of product contamination. Without 
appropriate documentation of procedures related to commingling or 
cross-contamination, it is difficult to verify that workers are 
informed of such procedures or that the procedures are adequate.
    FDA has issued warning and untitled letters to firms addressing 
noncompliance with the current ruminant feed ban regulation and a feed 
manufacturer has been permanently enjoined in connection with 
noncompliance with the current feed ban regulation.
    FDA is also concerned about intentional and unintentional 
misfeeding of non-ruminant feed to ruminants on the farm. Financial 
incentives for intentional misfeeding could occur any time inexpensive 
sources of prohibited protein are locally available to the feeder. The 
use of salvaged pet food that contains ruminant meat and bone meal is 
an example. There may be other incentives to intentionally feed non-
ruminant feed to cattle. For example, the Florida Department of 
Agriculture and Consumer Services issued a statement cautioning against 
the misuse of pet

[[Page 58578]]

food as feed for show cattle as a way to increase the shine in the 
cattle coat (Ref. 15). Unintentional feeding could occur on the farm 
from feeding ruminants and non-ruminant in close proximity to each 
other. If intentional or unintentional uses occur, this proposed rule 
would protect cattle by removing the highest risk material from the 
non-ruminant feed being used in cattle feed. Assuring that misfeeding 
does not occur on the farm is particularly difficult due to the large 
number of cattle feeding operations in the United States, and FDA's 
extremely limited resources to inspect these operations, which number 
over 1 million.
    Therefore, although overall compliance with the 1997 ruminant feed 
rule has been high for renderers, protein blenders, and feed mills, 
removal of the highest risk tissues from animal feed channels should 
serve to address noncompliance with the rule that could result in 
cattle exposure to prohibited material through cross-contamination, 
mislabeling, or intentional or unintentional misfeeding.

D. Cattle Materials Proposed to be Prohibited From Use in All Animal 
Food and Feed

1. Brain and Spinal Cord From Cattle 30 months of Age and Older
    The USDA interim final rule published on January 12, 2004, provides 
a full description of the scientific rationale for identifying the list 
of tissues and selection of the 30-month age criterion used in its 
definition of SRMs. FDA has adopted an identical definition of SRMs in 
its interim final rule regarding FDA-regulated human food and 
cosmetics. In the preamble of its July 14, 2004 interim final rule 
regarding human food, including dietary supplements, and cosmetics, FDA 
includes a detailed discussion of its rationale for the SRM definition. 
As discussed in the preamble to the USDA and FDA interim final rules, 
infectivity is not present in most tissues that harbor BSE infectivity 
until more than 30 months after the animal was exposed to the agent. 
Although the epidemiological and experimental data indicate that BSE 
can develop in animals less than 30 months of age, the evidence 
available to date indicates that this was a very rare occurrence, and 
was associated with high levels of circulating infectivity at the peak 
of the BSE epidemic in the United Kingdom. The agency continues to 
believe that the rationale for the 30-month age criterion described 
previously for human food and cosmetics is appropriate and proposes 
that it be applied to animal feed as well.
    In response to a question posed in the 2004 ANPRM as to which 
tissues should be defined as SRMs for animal feed, FDA received 
suggestions ranging from defining all animal protein as SRMs to 
limiting the SRM definition to the head only. FDA considered 
prohibiting from animal feed the same materials defined as SRMs that 
are currently prohibited from use in food for humans, but decided that 
proposing to require the removal of brain and spinal cord is the most 
appropriate approach at this time.
    In reaching the decision to propose to exclude only the brain and 
spinal cord from animal feed, FDA considered information regarding the 
tissue distribution of BSE infectivity. Under field conditions, BSE 
infectivity has been found in the brain, spinal cord, and retina of the 
eye in animals with clinical disease (Ref. 16). The Scientific Steering 
Committee (SSC) of the European Union (Ref. 17) has also reported on 
the proportion of total infectivity in various tissues.\1\ According to 
the report, in an animal with clinical BSE, approximately 64 percent of 
the infectivity is in the brain, 26 percent is in the spinal cord, 4 
percent is in the dorsal root ganglia, 2.5 percent is in the trigeminal 
ganglia, and 3 percent is in the distal ileum. The eyes are estimated 
to contain less than 1 percent of the infectivity. Although available 
data are limited on the distribution of tissue infectivity, data from 
both naturally infected and experimentally infected cattle support the 
finding that the brain and spinal cord are the tissues with the highest 
level of infectivity.
---------------------------------------------------------------------------

    \1\ A more recent report (Comer and Huntly, 2004, Journal of 
Risk Research, 7, (5) 523-543) attributes 84.3 percent of 
infectivity to brain and spinal cord and 9.6 percent to distal 
ileum. We chose not to use the data from this more recent report 
because its author (personal communications) explained that the 
newer data suggesting that the level of infectivity in the distal 
ileum at 6 to 18 months of age is higher than earlier estimates also 
suggest that it is lower than earlier estimates at 32 months of age.
---------------------------------------------------------------------------

    Because available data indicate that the brain and spinal cord 
contain about 90 percent of BSE infectivity (Ref. 17), FDA believes 
that the most appropriate course of action is to concentrate efforts on 
excluding these highest risk tissues from animal feed. In deciding to 
propose to prohibit brain and spinal cord only, rather than the same 
list of materials previously defined as SRMs, FDA also considered the 
following: (1) Surveillance data indicate the current risk of BSE to 
U.S. cattle is very low, (2) the existing ruminant feed regulation 
provides strong protection against BSE, and (3) the new measures 
considered in this proposed rule represent a secondary level of 
protection to address failures in compliance that may occur with the 
existing ruminant feed rule. FDA believes that the existing ruminant 
feed rule provides the primary line of defense by prohibiting the use 
in ruminant feed of all material with potential BSE infectivity. The 
measures proposed by this rule will effectively reinforce existing 
ruminant feed protection measures by removing the tissues with the 
highest infectivity from all animal feed. As a result, these measures 
greatly minimize BSE risks if cross-contamination of ruminant feed with 
non-ruminant feed, or diversion of non-ruminant feeds to ruminants, 
were to occur.
2. Cattle Not Inspected and Passed for Human Consumption
    As noted earlier in this document, the term ``cattle not inspected 
and passed for human consumption'' includes cattle not inspected and 
passed for human consumption by the appropriate regulatory authority as 
well as nonambulatory disabled cattle.
    European surveillance data indicate that cattle found dead or 
culled onsite, where the carcass was submitted to rendering (fallen 
stock), and cattle with health-related problems unfit for routine 
slaughter (emergency slaughter) have a greater incidence of BSE than 
healthy slaughter cattle. Surveillance data in the European Union in 
2002 showed that there were 27.95 positive animals per 10,000 emergency 
slaughter bovine animals tested and 6.15 positive animals per 10,000 
fallen stock bovine animals tested compared to 0.31 positive animals 
per 10,000 healthy slaughter animals tested (Ref. 18). In Switzerland, 
the odds of finding a BSE case in fallen stock and emergency slaughter 
cattle were found to be 49 and 58 times higher, respectively, compared 
to the odds of finding a BSE case through passive surveillance (Ref. 
19). These findings suggest that cattle not inspected and passed for 
human consumption are more likely to test positive for BSE than healthy 
cattle that have been inspected and passed for human consumption.
    Because cattle not inspected and passed for human consumption are 
included in the population of cattle at highest risk for BSE (Refs. 18 
and 19), and processes are currently not established in the rendering 
industry for verifying the age of such cattle through inspection, the 
agency is proposing to define brains and spinal cords from all cattle 
not inspected and passed for human consumption, regardless of age, to 
be cattle materials prohibited in animal feed. As noted previously, the

[[Page 58579]]

term cattle not inspected and passed for human consumption is defined 
in this proposed rule to include nonambulatory disabled cattle as 
defined by FDA in its interim final rule on human food and cosmetics 
and USDA in its interim final rule on human food. If the brains and 
spinal cords are removed from these animals, FDA is proposing that the 
remaining material can still be used in animal feed. FDA notes that for 
cattle not inspected and passed that are diseased or that die other 
than by slaughter, the entire carcass of such animals is adulterated 
under section 402(a)(5) of the act. FDA has traditionally exercised 
enforcement discretion with regard to the use of such animals in animal 
feed. For example, see Compliance Policy Guide 675.400. FDA intends to 
continue exercising such discretion for the use in animal feed of the 
remaining material from cattle that are diseased or that die other than 
by slaughter when the brain and spinal cord are removed. Because 
comments to the ANPRM were mixed on the feasibility of removing SRMs 
from cattle mortalities, FDA requests further comment on which tissues 
should be removed from this class of animals and the feasibility of 
removing them.
    In deciding to propose to allow these remaining materials to be 
used in animal feed, FDA considered the following: (1) brain and spinal 
contain about 90 percent of BSE infectivity (Ref. 17), (2) surveillance 
data indicate the current risk of BSE to U.S. cattle is very low, (3) 
the existing ruminant feed rule provides strong protection against BSE, 
and (4) the new measures considered in this proposed rule represent a 
secondary level of protection to address failures in compliance that 
may occur with the existing ruminant feed rule. FDA believes that the 
existing ruminant feed rule provides the primary line of defense by 
prohibiting the use in ruminant feed of all material with potential BSE 
infectivity. If the brains and spinal cords are not removed from such 
animals, FDA proposes that all parts of ``cattle not inspected and 
passed for human consumption'' be prohibited.
3. Mechanically-Separated Beef (MS)
    Mechanically-separated (MS) beef is a finely comminuted meat food 
product resulting from the mechanical separation and removal of most of 
the bone from attached skeletal muscle of cattle carcasses and parts of 
carcasses. This proposed definition of MS beef is consistent with, but 
not identical to, the definition of the term used by USDA in its 2004 
interim final rule (69 FR 1862) prohibiting its use in human food and 
by FDA in its 2004 interim final rule (69 FR 42255) prohibiting its use 
in human food, including dietary supplements and cosmetics. Those 
definitions provide that MS beef means a meat food product that meets 
the specification in 9 CFR 319.5. This USDA regulation applies to MS 
beef for human food use. Because there is MS beef produced solely for 
animal feed use that would not fall within the USDA specification, the 
definition of MS beef as proposed in this rule is meant to refer to 
beef that is the product of the mechanical separation process, 
regardless of whether it meets the USDA specifications for MS species 
in 9 CFR 319.5. The definition of MS beef is not meant to include 
product produced by Advanced Meat Recovery (AMR) systems used in the 
meat industry.
    Although MS beef was not considered in the 2002 ANPRM, 2004 ANPRM, 
or in the IRT report, FDA has included this material in this animal 
feed proposed rule to ensure that any such material that is used in 
animal feed is not contaminated with the other material prohibited by 
this proposed rule. A comment submitted in response to the 2004 ANPRM 
said that FDA should allow mechanically separated beef to be used for 
pet food if SRMs are removed from material going into the mechanical 
deboning equipment that separates meat from bone, because some pet food 
operations are very similar to slaughter establishments and are capable 
of removing SRMs.
    Because the mechanical separation process may result in the 
contamination of the MS beef product with spinal cord, FDA proposes to 
designate MS beef as cattle materials prohibited in animal feed if it 
is derived from carcasses or parts of carcasses from which cattle 
materials prohibited in animal feed were not previously removed.
4. Tallow
    Tallow is an animal-derived hard fat that has been heat processed; 
most tallow is derived from cattle. Any risk of BSE transmission from 
tallow is a result of protein that is present as an impurity in the 
tallow. Taylor et al. (Refs. 20 and 21) found, in rendering studies 
with abnormal prion protein, that the prion protein did not 
preferentially migrate into the fat fraction, but remained with the 
protein fraction. Therefore, there is no reason to believe that tallow 
is likely to contain unusually high amounts of prion protein as a 
constituent of the insoluble impurities fraction that remains in tallow 
after rendering. Taylor et al. (Refs. 20 and 21) also reported that the 
various rendering processes used for tallow production in the United 
Kingdom were sufficient to produce tallow that did not result in 
infection when injected into the brains of mice, even though the 
starting material was highly spiked with the scrapie agent. Wilesmith 
et al. (Ref. 22) noted that the geographical variation in the incidence 
of BSE in the United Kingdom was not consistent with the use of tallow 
in cattle feed and concluded that the most likely source of infection 
in cattle was BSE-contaminated meat and bone meal.
    The Office International des Epizooties (OIE), the world 
organization for animal health, categorizes tallow with insoluble 
impurities of no more than 0.15 percent as protein-free tallow. OIE 
guidelines recommend that tallow that meets this standard can be safely 
traded regardless of the BSE status of the exporting country (Ref. 23). 
FDA's Transmissible Spongiform Encephalopathy Advisory Committee 
(TSEAC) considered the safety of tallow and tallow derivatives in 1998 
(Ref. 24). Members of the committee indicated that tallow is a food 
with negligible or no risk of transmitting BSE to humans or animals.
    For the purposes of this proposed rule, tallow is defined as the 
rendered fat of cattle obtained by pressing or by applying any other 
extraction process to tissues derived directly from discrete adipose 
tissue masses or to other carcass parts and tissues. The 1997 ruminant 
feed final rule did not include tallow, fats, oils, and grease in the 
definition of animal proteins prohibited in ruminant feed because they 
are not proteins and were not considered to contain BSE infectivity. 
The agency said that infectivity studies conducted on some of these 
products (e.g., tallow) had demonstrated that they were at low risk of 
transmitting the TSE agent and; thus, it was unnecessary to restrict 
their use in ruminant feed (62 FR 30935). While the agency is not aware 
of any new scientific information suggesting that infectivity is 
present in tallow itself, the agency is concerned about potential BSE 
risks that tallow poses as a result of protein that is present as an 
impurity. These impurities may be of greater concern now because, as 
previously noted, new preliminary data suggest that the minimum 
infectious dose for BSE may be substantially lower than previously 
thought. We seek comment on this interpretation of the preliminary 
results.
    The agency is proposing to prohibit the use of tallow in animal 
food or feed that is derived from cattle materials prohibited in animal 
feed. However, the agency proposes to exempt from this requirement 
tallow that contains no

[[Page 58580]]

more than 0.15 percent insoluble impurities. The proposal would require 
that impurities be measured by the method entitled ``Insoluble 
Impurities'' (AOCS Official Method Ca 3a-46), American Oil Chemists' 
Society, which is incorporated by reference in accordance with 5 U.S.C. 
552(a) and 1 CFR part 51, or another method equivalent in accuracy, 
precision, and sensitivity to A.O.C.S. Official Method Ca 3a-46. In 
response to the 2004 ANPRM, comments were submitted to the agency 
requesting that the primary method for the impurity determination for 
tallow be one other than the method in the Food Chemicals Codex. 
Comments stated that the domestic tallow industry primarily uses a 
method of AOCS to measure insoluble impurities. In comparison to the 
Food Chemicals Codex method, comments stated that the AOCS method is 
less expensive, requires less solvent, and has lower solvent disposal 
costs. In addition, it does not require specialized equipment or 
supplies. FDA agrees with these comments, and proposes that the primary 
method for the impurity determination for tallow be the method from 
AOCS rather than the method in the Food Chemicals Codex.
    This proposed requirement for tallow would apply to all animal 
feed, including feed for ruminants. Since the existing ruminant feed 
rule Sec.  589.2000 (21 CFR 589.2000) does not include provisions 
relative to tallow, this proposal represents a new requirement for 
ruminant feed as well as for feed for non-ruminants. To make clear that 
this proposed requirement would apply to ruminant feed, FDA is 
proposing to amend Sec.  589.2000 to include the tallow requirements.
    FDA is also proposing to exempt tallow derivatives from the 
requirements of this rulemaking. Tallow derivatives are produced by 
subjecting tallow to chemical processes (hydrolysis, 
transesterification, and saponification) that involve high temperature 
and pressure. FDA's TSEAC considered tallow derivatives in 1998 (Ref. 
24), and determined that the rigorous conditions of manufacture are 
sufficient to reduce the BSE risk in tallow derivatives to 
insignificant levels. In addition, according to OIE guidelines tallow 
derivatives produced by hydrolysis, saponification, or 
transesterification using high temperature and pressure can be safely 
traded regardless of the BSE risk status of the country of origin (Ref. 
23).

E. Disposal of Cattle Materials Prohibited in Animal Feed

    FDA agrees with comments from the affected industry that a 
comprehensive plan would be needed to safely dispose of approximately 
2.5 billion pounds of material if FDA decided to prohibit all dead 
stock and the full list of SRMs, as defined in the USDA interim final 
rule (69 FR 1862) and the FDA interim final rule (69 FR 42255), from 
being rendered for use in animal feed. The 2.5 billion pounds of cattle 
material includes approximately 1.4 billion pounds of material from 
cattle slaughtered for human consumption and 1.1 billion pounds of 
material from cattle not inspected and passed for human consumption 
that are currently being rendered for use in animal feed. FDA is 
concerned about the feasibility of establishing a new infrastructure to 
safely dispose of this large quantity of material, as well as the time 
it would take to implement these processes.
    Limiting the list of SRMs as proposed by this rule reduces the 
volume of slaughter byproducts that would require alternative disposal. 
First, this proposal does not require the diversion from use in animal 
feed the small intestine and tonsils from the 28 million head of cattle 
under 30 months of age that are slaughtered annually. Second, only the 
brain and spinal cord (weighing 1.3 pounds per animal) rather than the 
head, spinal column, and small intestine, (weighing 88.5 pounds per 
animal) are diverted from the estimated 7 million head of cattle over 
30 months of age that are slaughtered annually in the U.S. FDA believes 
that this more limited amount of material from slaughter operations can 
be disposed of through landfill, incineration, or alkaline digestion.
    Based on comments received, FDA acknowledges that there is some 
uncertainty regarding the amount of material that will require 
alternative disposal as a result of the proposed requirements 
pertaining to cattle not inspected and passed for human consumption 
(i.e., dead stock and nonambulatory disabled cattle). FDA is including 
in this proposed rule the option to remove brain and spinal cord from 
cattle not inspected and passed for human consumption so that most of 
this material could continue to be rendered for use in animal feed. As 
previously noted, FDA intends to continue exercising enforcement 
discretion for the use in animal feed of the remaining material from 
cattle that are diseased or that die other than by slaughter when the 
brain and spinal cord are removed. As discussed in more detail in 
Section IV, Analysis of Economic Impacts, FDA acknowledges that while 
the proposed rule will result in additional material from these animals 
being disposed of by means other than rendering, FDA believes such 
increases will be modest. FDA seeks comment and further information on 
the feasibility of removing brain and spinal cord from cattle not 
inspected and passed for human consumption and on the impact of this 
proposed rule on the number of these cattle that would be disposed of 
by rendering.
    In summary, FDA believes that the measures proposed by this rule 
can be more feasibly implemented than a full SRM ban, and can add 
substantially to the protection provided by the current BSE feed 
regulation. With this approach, the resulting volume of material 
requiring special disposal would be manageable in the short term. This 
approach is also consistent with the advice of the IRT that a staged 
approach may be necessary in implementation of an SRM ban. Further, FDA 
believes that other feed controls that FDA previously considered, such 
as dedicated facilities, are not needed if these high-risk tissues are 
excluded from animal feed channels. Therefore, at this time FDA is not 
proposing rulemaking to address other feed control recommendations of 
the IRT or the additional planned measures announced by FDA on January 
26, 2004.

III. Description of Proposed Rule and Legal Authority

    FDA is proposing to establish a new Sec.  589.2001 (21 CFR 
259.2001), Cattle materials prohibited in animal food or feed. While 
the existing Sec.  589.2000 outlines requirements related to ruminant 
feeds only, proposed Sec.  589.2001 outlines requirements intended to 
apply to food or feed for all animal species. The terms and 
requirements of proposed Sec.  589.2001 are described in section IV.A 
of this document.

A. Definitions

    The proposed Sec.  589.2001(a) defines the following terms for the 
purposes of this regulation:
    (1) Cattle materials prohibited in animal feed includes: (i) the 
brains and spinal cords of cattle 30 months of age and older; (ii) the 
brains and spinal cords of cattle of any age not inspected and passed 
for human consumption; (iii) the entire carcass of cattle not inspected 
and passed for human consumption from which brains and spinal cords 
were not removed; (iv) mechanically separated beef that is derived from 
cattle materials prohibited

[[Page 58581]]

under (i), (ii), or (iii) above; and (v) tallow that is derived from 
cattle materials prohibited under (i), (ii), or (iii) above. Tallow 
that is derived from cattle materials prohibited under (i), (ii), or 
(iii) above that contains no more than 0.15 percent insoluble 
impurities and tallow derivatives are not considered cattle materials 
prohibited in animal feeds.
    (2) Cattle not inspected and passed for human consumption means 
cattle of any age that were not inspected and passed for human 
consumption by the appropriate regulatory authority. This term includes 
nonambulatory disabled cattle. Non-ambulatory disabled cattle are 
cattle that cannot rise from a recumbent position or that cannot walk, 
including, but not limited to, those with broken appendages, severed 
tendons or ligaments, nerve paralysis, fractured vertebral column, or 
metabolic conditions.
    (3) Mechanically separated beef means a meat food product that is 
finely comminuted, resulting from the mechanical separation and removal 
of most of the bone from attached skeletal muscle of cattle carcasses 
and parts of carcasses.
    (4) Renderer means any firm or individual that processes slaughter 
byproducts, animals unfit for human consumption, or meat scraps. The 
term includes persons who collect such materials and subject them to 
minimal processing, or distribute them to firms other than renderers 
(as defined in paragraph (a)(1)) whose intended use for the products 
may include animal feed, industrial use, or other uses. The term 
includes renderers that also blend animal protein products.
    (5) Tallow means the rendered fat of cattle obtained by pressing or 
by applying any other extraction process to tissues derived directly 
from discrete adipose tissue masses or to other carcass parts and 
tissues.
    (6) Tallow derivative means any product obtained through initial 
hydrolysis, saponification, or trans-esterification of tallow; chemical 
conversion of material obtained by hydrolysis, saponification, or 
trans-esterification may be applied to obtain the desired product.

B. Proposed Requirements

    Proposed Sec.  589.2001(b)(1) provides that no animal food or feed 
shall be manufactured from, processed with, or otherwise contain cattle 
materials prohibited in animal feed. Proposed Sec.  589.2001(b)(2) 
provides new requirements for renderers that handle cattle material 
prohibited in animal feed. Proposed Sec.  589.2001(b)(3) provides new 
requirements for renderers that handle any cattle material.
1. Proposed Requirements for Renderers That Manufacture, Process, 
Blend, or Distribute Cattle Materials Prohibited in Animal Feed
    The proposed Sec.  589.2001(b)(2) requires that renderers that 
handle cattle materials prohibited in animal feed use separate 
equipment or containers to handle such material once it has been 
separated from other cattle materials. This requirement is intended to 
ensure that equipment used to manufacture, process, blend, store, or 
transport cattle materials prohibited in animal feed or products that 
contain or may contain cattle materials prohibited in animal feed do 
not serve as a source of cross-contamination for materials intended for 
animal feed. In addition, proposed Sec.  589.2001(b)(2) requires 
renderers that manufacture, process, blend, or distribute cattle 
materials prohibited in animal feed or products that contain or may 
contain cattle materials prohibited in animal feed must: (1) Label the 
prohibited materials in a conspicuous manner with the statement ``Do 
not feed to animals''; (2) mark the prohibited material with an agent 
that can be readily detected on visual inspection; and (3) establish 
and maintain records sufficient to track the prohibited materials to 
ensure such material is not introduced into animal feed, and make the 
records available for inspection and copying by FDA. These proposed 
requirements are intended to ensure that cattle materials prohibited in 
animal feed do not enter the animal feed chain and thus have no 
opportunity for inclusion in animal food or feed. FDA believes that 
such material must be both labeled and marked to ensure that it does 
not enter the feed channels since without such measures this material 
would be indistinguishable from cattle materials not prohibited by this 
proposed rule. Marking the material will provide a readily detectable 
method on visual examination by which all persons in the animal feed 
chain can be made aware that the a product is prohibited material or 
contains prohibited material. Marking also will serve as a way to make 
the status of the material known if, for some reason, the label ``Do 
not feed to animals'' is separated from the product.
2. Proposed Requirements for Renderers that Manufacture, Process, 
Blend, or Distribute Any Cattle Materials
    Proposed Sec.  589.2001(b)(3) requires that renderers that handle 
any cattle materials shall: (1) Establish and maintain records 
sufficient to demonstrate that material rendered for use in animal feed 
was not manufactured from, processed with, or does not otherwise 
contain, cattle materials prohibited in animal feed, (2) make copies of 
records available for inspection and copying by FDA, and (3) be in 
compliance with requirements under Sec.  589.2000 regarding animal 
proteins prohibited in ruminant feed.

C. Proposed Recordkeeping and Access Requirements

    The proposed recordkeeping requirements associated with this rule 
are focused on renderers because FDA believes this is the point at 
which cattle material prohibited in animal feed could enter the animal 
feed channel. Renderers, as defined in this proposed rule, receive 
cattle materials from slaughter facilities or receive entire cattle 
carcasses that were not inspected and passed for human consumption and 
further process that material so that it may be used in animal feed. 
FDA believes this is the critical control point in the feed and feed 
ingredient processing channel at which the exclusion of cattle material 
prohibited in animal feed must be documented. Once material is removed 
from cattle and further processed, we may not be able to obtain the 
information necessary to determine whether it is cattle material 
prohibited in animal feed. There is currently no way to reliably test 
feed or feed ingredients for the presence of the BSE agent or for the 
presence of cattle materials prohibited in animal feed.
    This proposed rule requires that no animal feed or feed ingredient 
be manufactured from, processed with, or otherwise contain cattle 
materials prohibited in animal feed. However, FDA does not believe it 
is necessary for persons, other than renderers, that are involved in 
the manufacture or processing of feed or feed ingredients to maintain 
records documenting the exclusion of cattle materials prohibited in 
animal feed. FDA believes, for the reasons cited previously, that it is 
critical that such records be maintained at the point of the renderer. 
However, FDA believes that requiring the maintenance of such records at 
all manufacturing and processing points downstream would be redundant 
and provide little additional information of value. FDA seeks comments 
on the need to require that records be maintained by persons other than 
renderers.
    Because at this time there is no way to test reliably for the 
presence of the BSE agent or the presence of the cattle materials 
prohibited in proposed Sec.  589.2001(b)(1), renderers must depend

[[Page 58582]]

on records to ensure that the materials prohibited by this proposed 
rule are excluded from material intended for use in animal feed and 
that such material is appropriately disposed. Similarly, without 
adequate records kept by renderers and access to the records by the 
agency, FDA may not know whether renderers have complied with the 
requirements. We are proposing in Sec.  589.2001(b)(2)(iv) that 
renderers that manufacture, process, blend, or distribute cattle 
materials prohibited in animal feed establish and maintain records 
sufficient to demonstrate that such material was not introduced into 
animal feed. Furthermore, we are proposing in Sec.  589.2001(b)(3)(i) 
that renderers that manufacture, process, blend, or distribute cattle 
materials establish and maintain records sufficient to demonstrate that 
material rendered for use in animal feed was not manufactured from, 
processed with, or does not otherwise contain, cattle materials 
prohibited in animal feed.
    Proposed Sec.  589.2001(d) requires that the records required by 
this proposed rule be maintained for a minimum of 1 year. The 1-year 
record retention period is consistent with the existing requirements 
for ruminant feeds in Sec.  589.2000(h). We believe that for the 
purposes of the recordkeeping requirements, 1 year is appropriate in 
light of the time that the products will be in the animal feed 
production and distribution systems. Extending the record retention 
period would have little practical value in determining the source of 
BSE in an animal. This is also considering the potentially long time 
period from ingestion of the BSE agent in feed to manifestation of 
clinical signs and lesions and the lack of a reliable estimate for the 
latency period.
    The proposed rule does not specify the types of records that would 
need to be maintained in order to comply with the recordkeeping 
requirements. The agency seeks comments on what type of records would 
be appropriate and whether further detail is needed in the regulation 
regarding specific record requirements such as the specific data 
elements that must be included in such records.

D. Conforming Changes to Sec.  589.2000--Animal Proteins Prohibited in 
Ruminant Feed

    The requirements related to tallow in the proposed Sec.  589.2001 
are intended to apply to all animal feed, including feed for ruminants. 
Since the existing ruminant feed rule (Sec.  589.2000) does not include 
provisions relative to tallow, this proposal represents a new 
requirement for ruminant feed as well as for feed for non-ruminants. 
Therefore, due to concerns about protein impurities present in tallow, 
FDA is proposing to amend Sec.  589.2000 to include tallow in the 
definition of ``protein derived from mammalian tissues'' and to add 
language that excludes from the definition of ``protein derived from 
mammalian tissues'' tallow containing no more than 0.15 percent 
insoluble impurities and tallow derivatives as specified in proposed 
Sec.  589.2001.

E. Legal Authority

    FDA is issuing this proposed regulation on animal feed under the 
food adulteration provisions in sections 402(a)(2)(C), (a)(3), (a)(4), 
(a)(5), 409, and 701(a) of the Federal Food, Drug, and Cosmetic Act 
(the act) (21 U.S.C. 342(a)(2)(C), (a)(3), (a)(4), (a)(5), 348, and 
371(a)). The term ``food'' is defined to include articles used for food 
``for man or other animals.'' See section 201 of the act (21 U.S.C. 
321(f)). We note that the material that would be prohibited under this 
proposed rule from use in animal feed continues to meet the definition 
of food. Therefore, this material would be adulterated or misbranded 
under the act based on violations of the proposed rule, as well as any 
animal feed or feed ingredients that were manufactured from, processed 
with, or otherwise contained, the prohibited material.
    Under section 402(a)(3) of the act, a food is deemed adulterated 
``if it consists in whole or in part of any filthy, putrid, or 
decomposed substance, or if it is otherwise unfit for food.'' 
``Otherwise unfit for food'' is an independent clause in section 
402(a)(3). The statute does not require that a food be filthy, putrid, 
or decomposed for it to be ``otherwise unfit for food.'' In FDA's 
interim final rule on the Use of Materials Derived from Cattle in Human 
Food and Cosmetics (69 FR 42256 at 42264), we concluded that a food can 
be ``otherwise unfit for food'' based on health risks, and sought 
comments on that interpretation. Because of the possibility of 
intentional or unintentional use of the materials that would prohibited 
under this proposed rule in ruminant feed and the risk of BSE to 
ruminants and humans from these materials, we have tentatively 
concluded that these materials would be ``otherwise unfit for food'' 
under section 402(a)(3) of the act. We seek comment on this 
interpretation.
    Under section 402(a)(4) of the act, a food is deemed adulterated 
``if it has been prepared, packed, or held under insanitary conditions 
whereby it may have become contaminated with filth, or whereby it may 
have been rendered injurious to health.'' The failure to ensure that 
animal feed is prepared, packed, or held under conditions in which 
cattle materials prohibited in animal feed under this proposed rule do 
not contaminate animal feed would constitute an insanitary condition 
whereby the feed may have been rendered injurious to health. Thus, this 
insanitary condition would render the animal feed adulterated under 
section 402(a)(4) of the act.
    Under section 402(a)(5) of the act, food is deemed adulterated ``if 
it is, in whole or in part, the product * * * of an animal which has 
died otherwise than by slaughter.'' Some cattle are not inspected and 
passed because they are diseased or have died before slaughter. 
Material from these cattle that are diseased or that die otherwise than 
by slaughter that is used as animal feed would render that feed 
adulterated under section 402(a)(5) of the Act. FDA has traditionally 
exercised enforcement discretion with regard to the use of such animals 
in animal feed. For example, see Compliance Policy Guide 675.400. FDA 
intends to continue exercising such discretion for the use in animal 
feed of the remaining material from cattle that are diseased or that 
die other than by slaughter when the brain and spinal cord are removed.
    We are also relying on the adulteration provision in section 
402(a)(2)(C)(i) of the act. Section 402(a)(2)(C)(i) deems a food 
adulterated if it is or bears or contains a food additive that is 
unsafe under section 409 of the act. Section 201(s) of the act, (21 
U.S.C. 321(s)), defines as a food additive any substance whose intended 
use results or may reasonably be expected to result in it becoming a 
component of food unless, among other things, it is the subject of a 
prior sanction (explicit approval for a specific use by USDA or FDA 
before September 6, 1958), or is generally recognized as safe (GRAS). 
Section 409 of the act provides that a food additive is unsafe unless 
it and its use conform to a food additive regulation or an exemption 
under section 409(j).
    Prior sanctions are described in part 570 (21 CFR part 570). FDA is 
not aware of any prior sanctions that relate to the present animal feed 
use of the cattle material that would be prohibited in animal feed 
under this proposed rule. Any person who intends to assert or rely on 
such sanction is required to submit proof of the existence of the 
applicable prior sanction. The failure of any person to come forward 
with proof of such an applicable prior sanction in response to this 
notice will constitute a waiver of

[[Page 58583]]

the right to assert or rely on such sanction at any later time.
    A determination that a substance added directly or indirectly to a 
food is GRAS, for its intended use is generally based on scientific 
information regarding the composition of the substance, its use, method 
of preparation, methods for detecting its presence in food, and 
information about its functionality in food as determined by experts 
qualified by scientific training and experience to evaluate the safety 
of such a substance (Sec.  570.30). A substance added to food becomes 
GRAS as a result of a common understanding about the substance 
throughout the scientific community familiar with the safety of such 
substances. The basis of expert views may be either scientific 
procedures, or, in the case of a substance used in food before January 
1, 1958, experience based on common use in food (Sec.  570.30(a)). 
Substances that are GRAS based on use before January 1, 1958, must be 
currently recognized as safe based on their pre-1958 use (See United 
States v. Naremco, 553 F. 2d 1138 (8th Cir. 1977; compare United States 
v. Western Serum, 666 F. 2d 335 (9th Cir. 1982)).
    General recognition of safety based upon scientific procedures 
requires the same quantity and quality of scientific evidence as is 
required to obtain approval of a food additive regulation for the 
ingredient (21 CFR 570.30(b)). (See United States v. Naremco, 553 F.2d 
at 1143). A substance is not GRAS if there is a genuine dispute among 
experts as to its recognition (An Article of Drug * * * Furestrol 
Vaginal Suppositories, 294 F. Supp 1307 (N.D. Ga. 1968), aff'd 415 F.2d 
390 (5th Cir. 1969)). It is not enough, in attempting to establish that 
a substance is GRAS, to establish that there is an absence of 
scientific studies that demonstrate the substance to be unsafe; there 
must be studies that show the substance to be safe (United States v. An 
Article of Food * * * CoCo Rico, 752 F.2d 11 (1st Cir. 1985)). 
Conversely, a substance may be ineligible for GRAS status if studies 
show that the substance is, or may be, unsafe, or if there is a 
conflict in studies.
    Expert opinion that cattle materials that would be prohibited in 
animal feed under this proposed rule are GRAS would need to be 
supported by scientific literature and other sources of data and 
information, establishing that there is a reasonable certainty of no 
harm from the material under the intended conditions of use. Expert 
opinion would need to address topics such as whether BSE infectivity 
can be detected, and whether it is reasonably certain that the BSE 
agent will not be transmitted through cattle materials that would 
prohibited in animal feed under this proposed rule. The burden of 
establishing that a substance is GRAS is on the proponent of the 
substance. (See CoCo Rico, supra.)
    For the reasons discussed in other sections of this document, the 
agency is tentatively concluding that cattle materials prohibited in 
animal feed under this proposed rule are not GRAS by qualified experts 
for use in animal food and, therefore, would be food additives. Section 
402(a)(2)(C)(i) and (ii) of the act deems food adulterated ``if it is 
or it bears or contains any food additive which is unsafe within the 
meaning of section 409 * * * .'' Under section 409(a), a food additive 
is unsafe unless a food additive regulation or an exemption is in 
effect with respect to its use or its intended use. Therefore, in the 
absence of a food additive regulation or an exemption, the cattle 
materials that would be prohibited in animal feed under this proposed 
rule would be adulterated under section 402(a)(2)(C)(i) of the act 
because it bears or contains an unsafe food additive, and their 
presence in animal feed would render the food adulterated.
    Under section 701(a) of the act, FDA is authorized to issue 
regulations for the act's efficient enforcement. The proposed 
regulation would require measures to prevent animal food from being 
unfit for food, being or bearing an unsafe food additive, being the 
product of an animal that died otherwise than by slaughter. The 
measures will also be required to prevent animal food from being held 
under insanitary conditions whereby it may have been rendered injurious 
to health. These proposed measures would allow for the efficient 
enforcement of the act. Under the proposed regulations, renderers would 
be required to establish and maintain records to track cattle materials 
prohibited in animal feed to ensure that such material is not 
introduced into animal feed and make such records available to FDA for 
inspection and copying. Once material is removed from cattle, we may 
not be able to obtain the information necessary to determine whether it 
is prohibited cattle material. Because at this time there is no way to 
test reliably for the presence of the BSE agent or the presence of the 
cattle materials prohibited in proposed Sec.  589.2001(b)(1), renderers 
must depend on records to ensure that their products do not contain 
cattle materials prohibited from animal feed. In addition, without 
adequate records, FDA cannot know whether renderers have complied with 
the regulations that prohibit the use of certain cattle material in 
rendered products intended for animal feed. For example, we would not 
know from examination of a spinal cord whether the source animal was 
over 30 months of age at the time of slaughter or whether the cattle 
had been inspected and passed. Therefore, the proposed recordkeeping 
and records access requirements are necessary for the efficient 
enforcement of the proposed rule. Under the proposed rule, failure to 
comply with the recordkeeping and records access requirements would 
render the cattle material and any animal feed manufactured from, 
processed with, or otherwise containing, the cattle material 
adulterated under section 402(a)(4) of the act.
    Furthermore, the proposed marking provision in Sec.  589.2001 is 
necessary for the efficient enforcement of the act. Because there is 
currently no reliable method to determine which cattle materials would 
be the prohibited materials, marking is necessary to ensure compliance 
with the proposed requirement that animal feed is not manufactured 
from, processed with, or otherwise contains the prohibited cattle 
materials. Under the proposed rule, failure to comply with this marking 
requirement would render the cattle material and any animal feed 
manufactured from, processed with, or otherwise containing, the cattle 
material adulterated under section 402(a)(4) of the act.
    FDA is issuing the proposed labeling requirement under sections 
403(a)(1) and 201(n) of the act (21 U.S.C. 343(a)(1)). Section 
403(a)(1) provides that a food is deemed misbranded if its labeling is 
false or misleading in any particular. Section 201(n) provides that:
     * * * in determining whether the labeling of a product is 
misleading, there shall be taken into account (among other things) 
not only representations made or suggested by statement, word, 
design, device, or any combination thereof, but also the extent to 
which the labeling * * * fails to reveal facts material in light of 
such representations or material with respect to consequences which 
may result from the use of the article to which the labeling * * * 
relates under conditions of use prescribed in the labeling * * * or 
under such conditions of use as are customary or usual.
    The proposed rule would require cattle material prohibited in 
animal feed to be labeled ``Do not feed to animals.'' We believe this 
statement is material with respect to the consequences that may result 
from the use of this material within the meaning of section 201(n) of 
the act. As discussed in other sections of this document, the use of 
the material

[[Page 58584]]

that would be prohibited under this proposed rule presents a risk of 
BSE. Furthermore, there are no available definitive tests to detect 
this material in feed. Therefore, under this proposed rule, the failure 
to include this labeling statement would render the cattle material or 
feed containing the prohibited cattle material misbranded under section 
403(a)(1) of the act. We are also proposing that such statement be made 
in a conspicuous manner. Under section 403(f) of the act, (21 U.S.C. 
343(f)), a food is misbranded if ``any word, statement, or other 
information required by or under authority of this Act to appear on the 
label or labeling is not prominently placed thereon with such 
conspicuousness * * * and in such terms as to render it likely to be 
read and understood by the ordinary individual under customary 
condition of purchase and use.'' Therefore, under the proposed rule, 
the failure to include the statement ``Do not feed to animals'' in a 
conspicuous manner would render the cattle materials or any feed 
containing the cattle materials misbranded under section 403(f) of the 
act.

IV. Analysis of Economic Impacts

    FDA has examined the impacts of the proposed rule under Executive 
Order 12866, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the 
Unfunded Mandates Reform Act of 1995 (Public Law 104-4). Executive 
Order 12866 directs agencies to assess all costs and benefits of 
available regulatory alternatives and, when regulation is necessary, to 
select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety, and other 
advantages; distributive impacts, and equity).
    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires 
that agencies prepare a written statement, which includes an assessment 
of anticipated costs and benefits, before proposing ``any rule that 
includes any Federal mandate that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100,000,000 or more (adjusted annually for 
inflation) in any one year.'' The current threshold after adjustment 
for inflation is $115 million, using the most current (2003) Implicit 
Price Deflator for the Gross Domestic Product. FDA does not expect this 
proposed rule to result in any 1-year expenditure that would meet or 
exceed this amount.
    FDA tentatively finds that the proposed rule does not constitute an 
economically significant regulatory action as defined in Section 
3(f)(1) of Executive Order 12866. We base this conclusion on both a 
study of the impacts on industry of the proposed rule (on file at the 
Division of Dockets Management (see ADDRESSES) conducted for FDA by the 
Eastern Research Group (ERG)), a private consulting firm, and the 
discussion in the remainder of this section (Ref. 25). The agency has 
further tentatively determined that the proposed rule may have a 
significant impact on a substantial number of small entities. This 
proposed rule imposes no mandates on government entities, and would not 
be expected to require the expenditure of over $115 million in any 1 
year by the private sector. As such, no further analysis of anticipated 
costs and benefits is required by the Unfunded Mandates Reform Act.
    The following regulatory impact analysis begins with a summary of 
the proposed rule and the expected benefits and costs. Next, in section 
V.B of this document, we discuss the need for the regulation. In 
section V.C, we discuss the benefits of the proposed rule, while in 
section V.D, we discuss the costs. In section V.E, we discuss the costs 
to the government. Finally, in section V.F, we discuss the regulatory 
flexibility analysis.

A. Summary of Proposed Regulatory Impact Analysis

    The proposed regulation would prohibit the use of certain cattle 
materials in any animal feed. The cattle materials prohibited in animal 
feed (CMPAF) would include the brain and spinal cord of all cattle 30 
months of age or older, as well as the brain and spinal cord of cattle 
not inspected and passed for human consumption regardless of age, the 
entire carcass of cattle not inspected and passed if brain and spinal 
cord is not removed (again, regardless of age), as well as other 
materials. For the purposes of this proposed rule, the term ``cattle 
not inspected and passed for human consumption'' includes nonambulatory 
disabled cattle. Tallow derived from any of the prohibited materials 
named previously would also be banned from use in animal feed unless it 
contains no more than 0.15 percent insoluble impurities. MS beef from 
any of the prohibited materials named above would be prohibited from 
use in animal feed. Additional provisions of the proposed rule would 
require renderers that handle cattle materials prohibited in animal 
feed to use separate equipment or containers to handle this material 
once it has been separated from other cattle materials. Such renderers 
will also be required to follow certain procedures for labeling and 
marking prohibited material and recordkeeping and records access.
    The benefits of the proposed rule include the elimination of the 
vast majority of the risk of spreading BSE to other cattle from 
intentional or unintentional use of non-ruminant feed for ruminants or 
cross-contamination of ruminant feed with non-ruminant feed or 
ingredients intended for non-ruminant feed. FDA believes that the 
proposed rule would effectively remove from use in non-ruminant feeds 
those cattle tissues that account for approximately 90 percent of 
potential BSE infectivity. Although the animal and public health 
benefit associated with the additional BSE risk reduction is paramount, 
the U.S. economy may also benefit from increased exports to the extent 
that the proposed rule, if finalized, persuades foreign governments 
that U.S. beef products are safe to import. Although we are unable to 
quantify these benefits, they are potentially large, because the 
expected loss of exports from the discovery of one infected cow in 
Washington State in December 2003 amounted to approximately $3.4 
billion in the first year (Ref. 26).
    The total costs to industry of complying with the proposed rule 
range from roughly $14 million to $24 million per year annualized over 
10 years assuming a 7-percent discount rate (at a 3-percent discount 
rate, the cost would range from $14 million to $23 million). These 
estimated costs are the sum of the costs including: (1) The ban on the 
use of certain tissues from cattle 30 months of age or older and cattle 
not inspected and passed for human consumption in any animal feed and 
(2) feed substitution costs. We discuss the proposed brain and spinal 
cord prohibitions as direct costs to the affected firms (including 
disposal costs, where applicable) and the firms' lost revenues from the 
ban on these raw materials used in feed product inputs. Then, we 
discuss the costs incurred by feed substitution costs. Table 1 of this 
document shows a summary of these costs.
    The proposed ban on the use of certain tissues from cattle 30 
months of age or older and cattle not inspected and passed for human 
consumption in any animal feed would require slaughterers and renderers 
that process cattle 30 months of age or older and firms that process 
dead, down, disabled, and diseased cattle to separate the CMPAF from 
the remaining cattle offal that could still be used for animal feed. We 
estimate that, for slaughterers, the separation of these materials from 
cattle

[[Page 58585]]

30 months of age or older and cattle not inspected and passed for human 
consumption regardless of age would require about $555,000 in one-time 
capital costs (or $79,000 annualized at 7 percent and $65,000 
annualized at 3 percent, over 10 years) (see table 1 of this document). 
We estimate that the annual cost of the additional labor to separate 
these CMPAF from other cattle offal is estimated to cost about $597,000 
annually. Although compliance costs for these activities would be borne 
initially by slaughterers, and are presented as such by ERG, a portion 
of the costs are likely to be passed along to cattle producers and 
consumers. For renderers, capital investments and labor for separation 
and segregation of CMPAF would range from about $1.88 million to $4.65 
million annually.
    Our analysis does not project a specific disposal route for CMPAF 
due to the uncertainty inherent in disposing of such low volumes of 
material. Instead, it describes various disposal methods that may be 
employed and estimated a $12 per 100 lbs. (cwt) of CMPAF disposal cost 
(including transportation costs) for the low-cost end of the range of 
disposal methods. The cost to dispose of the CMPAF is estimated to 
range from $7.72 million to $9.97 million annually. Additional on-farm 
disposal of dead and nonambulatory disabled cattle is expected to 
increase compliance costs from about $1.02 million to $2.53 million 
annually (including labor and equipment). The annual revenues foregone 
from meat and bone meal (MBM) sales due to the prohibition of CMPAF in 
animal feeds are estimated at $1.41 million to $2.78 million, and 
foregone tallow sales are estimated at $1.37 million to $2.62 million. 
This includes the value from CMPAF from cattle 30 months of age or 
older and cattle not inspected and passed for human consumption 
regardless of age, as well as from whole carcasses of cattle not 
inspected and passed for human consumption that could not be rendered 
due to this proposed rule.
    We considered including a provision in this proposed rule that 
would limit the use of all tallow in animal feed to that which contains 
no more than 0.15 percent insoluble impurities, not just tallow derived 
from the materials proposed to be prohibited in animal feed that 
contains no more than 0.15 percent insoluble impurities. Analysis of 
this alternative concluded that it would result in annualized costs of 
about $1.78 million. These costs would consist of capital and operating 
costs for polishing centrifuges that would be needed by a small segment 
of independent renderers. We have not included a provision requiring 
that all tallow meet the 0.15 percent limit in the proposal because the 
CMPAF ban would effectively negate the risk of infectivity in non-
CMPAF-derived tallow. We invite public comments and data on the need 
for, and impacts of, a provision that would require all tallow used in 
animal feeds meet the 0.15 percent limit.

                   Table 1.--Total Costs ($ Millions)
------------------------------------------------------------------------
                                                           Annualized
       Cost Item         One-Time Cost   Annual Costs       Costs\1\
------------------------------------------------------------------------
Slaughter Facilities    ..............  ..............  ................
------------------------------------------------------------------------
Capital Investments     $0.56           N/A             $0.08
------------------------------------------------------------------------
Labor                   ..............  $0.60           $0.60
------------------------------------------------------------------------
Lost Value of MBM       ..............  $1.41--$2.76    $1.41--$2.78
 (cattle 30 months of
 age or older, cattle
 not inspected and
 passed)
------------------------------------------------------------------------
Lost Value of Tallow    ..............  $1.37--$2.62    $1.37--$2.62
 (cattle 30 months of
 age or older, cattle
 not inspected and
 passed)
------------------------------------------------------------------------
Disposal of cattle not  ..............  ..............  ................
 inspected and passed
------------------------------------------------------------------------
Labor                   ..............  $0.12--$0.29    $0.12--$0.29
------------------------------------------------------------------------
Equipment               ..............  $0.9--$2.23     $0.9--$2.23
------------------------------------------------------------------------
Renderer Facilities     ..............  ..............  ................
------------------------------------------------------------------------
Capital Investments     $3.11-$7.67     $0.04--$0.11    $0.49--$1.20
------------------------------------------------------------------------
Labor                   ..............   $1.40--$3.45   $1.40--$3.45
------------------------------------------------------------------------
Disposal of CMPAF from  ..............  $7.72--$9.97    $7.72--$9.97
 cattle 30 months of
 age or older, cattle
 not inspected and
 passed
------------------------------------------------------------------------
CMPAF Marking (High     ..............  $0.01           $0.01
 Estimate)
------------------------------------------------------------------------
Recordkeeping/Labeling   $0.10           $0.05           $0.06
------------------------------------------------------------------------
Feed Substitution       ..............  $0.30--$0.46     $0.30--$0.46
------------------------------------------------------------------------
Proposed Rule Total      $3.76           $13.91--$22.5   $14.44--$23.75
 Costs                                   6
------------------------------------------------------------------------
\1\ Annualized costs equal to annual costs plus one-time costs at 7
  percent over 10 years. Using a 3 percent rate, annualized costs equal
  $23,535,000.

    FDA believes that this proposal, when evaluated in terms of its 
incremental cost-effectiveness at reducing risks from BSE, is more 
consistent with efficient science-based risk management than other 
regulatory approaches that it identified in the 2004 ANPRM. This 
proposal limits use of animal tissues for which infectivity is high 
relative to

[[Page 58586]]

tissue weight. Weight is a key determinant of the incremental costs 
from excluding tissues from rendering for animal feed. The approach 
adopted in this proposal is likely to be relatively cost-effective 
because it is directed primarily at those tissues for which infectivity 
is likely to be high relative to control compliance costs.
    In the 2004 ANPRM, FDA stated it was considering prohibiting a 
larger list of cattle tissues (the full SRM list) from use in all 
animal feeds. Under this option, SRMs would be defined as the skull, 
brain, eyes, spinal cord, trigeminal ganglia, vertebral column 
(excluding the vertebrae of the tail, the transverse processes of the 
thoracic and lumbar vertebrae, and the wings of the sacrum) and dorsal 
root ganglia of all cattle over 30 months of age or older, including 
the tonsils and distal ileum of all cattle regardless of age. 
Additionally, this option would prohibit the small intestine of all 
cattle, all material from nonambulatory disabled cattle, all material 
from cattle that are not inspected and passed for human consumption, 
and MS beef. Lastly, tallow derived from other prohibited materials and 
containing more than 0.15 percent insoluble impurities would also be 
prohibited from use in all animal feeds under this SRM option. As 
detailed later in the analysis of alternatives, we have not included 
all of these measures in this proposed rule because we believe the 
proposed rule adequately addresses the risk from the presence of the 
highest risk cattle material in the animal feed chain. We also note 
that the proposed rule offers a more cost-effective approach to 
achieving nearly the same level of protection against the spread of BSE 
with regard to the presence of high-risk material in the non-ruminant 
feed supply.
    The approach described in the 2004 ANPRM is itself a refinement of 
an approach announced early in 2004. In January 2004, shortly after 
USDA reported finding a BSE-infected cow in Washington State, HHS 
announced its intention to amend the current animal feed regulations by 
adding several materials to the list of substances prohibited from use 
in ruminant feed (Ref. 27). These materials included mammalian blood 
and blood products; inspected meat products that have been cooked, 
offered for human food, and then further heat-processed for feed (such 
as plate waste and used cellulosic casings); and poultry litter. 
Further, FDA planned to require establishments that manufacture, 
process, blend, or distribute both products containing mammalian-
derived proteins and ruminant feed to use separate equipment or 
facilities in their manufacture, processing and handling.
    Preliminary analysis of the regulatory approach described in the 
January 2004 announcement (Ref. 27) suggests that it is relatively less 
effective in risk reduction compared to the CMPAF and SRM bans because 
it would not remove the highest risk tissue (brain and spinal cord) 
from animal feed channels. Instead, the approach described in the 
January 2004 announcement would continue to allow the highest risk 
cattle material in non-ruminant feed, but includes measures intended to 
prevent cross-contamination of ruminant feed. Although we have not been 
able to quantify the risk reduction associated with the approach 
announced in January 2004, it is comparable in costs to the full SRM 
ban described in the 2004 ANPRM. As a result we are not proposing it 
here.
    In developing this proposed rule we also considered other 
alternatives (not included here), including combinations of bans of 
various cattle tissues, from cattle of various ages (>30 months and <30 
months) and various states (slaughtered for human food, deads, 
downers). All of these resulted in costs over $100 million per year 
with potential infective tissue reductions between 80 percent and 99 
percent, when compared to the base case scenario.
    Table 2 of this document lists the proposed rule (the CMPAF ban), 
the SRM ban, and one of the options mentioned previously, namely a ban 
on brain and spinal cord from slaughter cattle 30 months of age or 
older, and a ban on the entire carcass of all dead and downed cattle. 
The table lists both the expected costs of these options, and our best 
estimate of the percent reduction in cattle tissues known to harbor BSE 
infectivity. The proposed rule would reduce cattle oral ID50s (the 
amount of infective material that would result in a case of BSE in 50 
percent of the cattle that consumed it) that are available for use in 
animal feed by about 90 percent as much as a ban on the full list of 
SRMs (option 3), while imposing only 7 to 10 percent of the costs of 
the SRM option (0.07 = $14 million/$195 million; 0.10 = $24 million/
$240 million). The second option would reduce the cattle oral ID50s by 
more than 90 percent (a less than 10 percent increase over option 1), 
but would impose costs that are about five to nine times greater than 
option 1, though still only about 50 percent to 70 percent of the costs 
of option 3. Based on the level of protection provided against the 
spread of BSE and its cost-effectiveness, we believe the proposed rule 
to be the most appropriate. FDA seeks further comment and scientific 
and risk information on this analysis of additional regulatory options 
for strengthening animal feed safeguards.

          Table 2.--Cost-Effectiveness of Alternative Policies
------------------------------------------------------------------------
Option (Description of Banned       Infectivity         Annual Cost ($
      Tissues/Materials)           Reduction\1\           millions)
------------------------------------------------------------------------
CMPAF list from (1) Cattle 30   90%                   $14--$24
 months or older, (2) deads,
 (3) downers and (4), MS beef
 if CMPAF not removed from
 carcass, dedicated equipment/
 container requirement;
 tallow restriction (proposed
 rule)
------------------------------------------------------------------------
Brain and spinal cord from      >90%                  $115--$135\2\
 cattle 30 months or older,
 carcasses of all deads and
 downs, MS Beef
------------------------------------------------------------------------
Full SRM list from cattle 30    >99%                  $195--$240
 months or older, tonsils and
 distal ileum from cattle of
 all ages, carcass of all
 deads and downers, MS beef,
 tallow restriction
------------------------------------------------------------------------
\1\ Percent of ID50s from an infected animal that would be banned from
  use in animal feed.
\2\ Detailed cost estimate of this alternative is not included in the
  regulatory flexibility analysis section of this document.


[[Page 58587]]

B. Need for Regulation

    Executive Order 12866 directs agencies to assess the need for any 
significant regulatory action and an explanation of how the regulation 
will meet that need. In this instance, FDA tentatively concludes that 
private incentive systems for both suppliers and purchasers in markets 
for cattle, rendering, and ruminant feed may inadequately address the 
risk of BSE. This market failure is a result of inadequate information 
being available to buyers of potentially infective animal feed. Because 
of the risk of cross contamination during feed production and the risk 
of inadvertently feeding non-ruminant feed to ruminants on an 
integrated farm, buyers of ruminant and non-ruminant feed would likely 
value a decrease in risk of BSE transmission if the market were able to 
provide it. Buyers, however, have little information about the BSE 
infectivity of feed because the costs to them of ascertaining 
infectivity are very high and higher than the costs to the feed 
producers. As a result, buyers may, without the current or proposed 
feed rules, unknowingly buy feed contaminated with BSE because of the 
presence of CMPAF.
    The potential market failures created by the continued use of 
materials that this proposed rule would eliminate are the same as in 
the 1997 ruminant feed final rule. If feed purchasers could easily 
identify the risk of the infective agent associated with products from 
specific suppliers, they could more easily reduce these risks by 
refusing to buy feed products derived from ruminants known to have 
consumed prohibited CMPAF. Feed purchasers are unlikely to obtain the 
information they need due to the long incubation period for BSE that 
could lead to a suboptimal level of risk prevention by purchasers 
during the incubation period. Ruminant producers have no way of knowing 
whether a particular batch of feed or feed ingredients intended for 
ruminants are free of potentially infective proteins due to the 
possibility of CMPAFs being introduced through cross-contamination with 
feed or feed ingredients intended for non-ruminants.

C. Benefits

    The purpose of the proposed rule is to further reduce the risk of 
BSE spreading within the cattle population. Reduced risk of BSE among 
cattle also reduces human exposure to variant Cruetzfeldt-Jakob disease 
(vCJD) believed to be caused by consumption of beef products 
contaminated with the BSE agent as well as increases the potential for 
exports by reducing foreign governments' concerns about the quality of 
U.S. beef. In this section, we first address the reductions in the risk 
of BSE to cattle in the United States and the corresponding protection 
of human health from the major provisions of the proposal. We then 
summarize the available evidence about the likely effect of this 
proposed rule on U.S. exports of beef and other livestock products.
1. Risk Reduction
    FDA estimates that banning CMPAFs from use in any animal feed would 
effectively remove about 90 percent of any remaining potential 
infectivity from possible spread through the feed system. To derive 
this estimate of the risk reduction from the proposed CMPAF ban, we 
assume that the number of new BSE cases is proportional to the amount 
of all infectious material included in feed. Given this assumption, we 
can estimate the percentage reduction in the risk of new BSE cases as 
the percentage reduction in infectious material. A 1999 report by the 
Scientific Steering Committee of the European Union suggests that the 
brain and spinal cord constitute 89.7 percent of the total infective 
load in a case of BSE (Ref. 28). This rule would prohibit use in all 
animal feed of these tissues (CMPAFs) from cattle 30 months of age or 
older and all cattle not inspected and passed for human consumption. 
CMPAF, when taken from slaughtered cattle less than 30 months of age, 
would not be prohibited from use in all animal feed because the 
probability is very low that tissues from cattle of this age would 
contain BSE infectivity. Thus, banning CMPAF would effectively remove 
about 90 percent of total infectivity from animal feed. The absolute 
level of animal health risk reduced by this rule would depend on the 
number of infected animals in the United States and the extent to which 
cattle get exposed to infected material.
    The potential human exposure to infectious materials from consuming 
beef is already small since USDA and FDA prohibit the use of certain 
cattle materials, including SRMs, from human food. In its preliminary 
analysis (Ref. 26), USDA modified the Harvard-Tuskegee model and 
estimated that the two interim final rules issued in January 2004 
reduced human exposure to infectious materials by an average of 80 
percent. For example, USDA estimated if 5 BSE infected bulls were 
introduced in 2003 and its control measures take effect in 2004, 
consumers would be exposed to 4 animal ID50s between 2004 and 2020 
compared to 18.5 animal ID50s without these measures (Ref. 26, Table 
13). The estimate of percent reduction in exposure is insensitive to 
the assumed number of infected animals introduced into the United 
States. To the extent this rulemaking further reduces the likelihood of 
the spread of BSE, it further reduces the already small likelihood of 
human exposure to the infectious material.
    Assessing the public health implications from estimates of the 
human exposure to the BSE agent is difficult because there is no agreed 
upon dose-response relationship between human exposure to cattle ID50s 
and vCJD cases. Nonetheless, the experience of the United Kingdom 
suggests that the BSE agent is many times less infective in humans than 
in cattle. During the 1980s and 1990s, in the absence of preventive 
control measures, millions of ID50s may have been available for 
consumption by residents of the United Kingdom, since each cow with 
clinical symptoms of BSE contains about 7,800 ID50s. The cumulative 
number of definitive or probable vCJD cases identified in the United 
Kingdom as of September 1, 2005, is 157 (Ref. 29). Thus, human exposure 
to a few, or even a few dozen ID50s, may represent a relatively small 
risk to public health. FDA solicits additional information on the dose 
response relationship between ID50s and incidence of vCJD.
2. Increased Export Potential
    A second major category of benefits pertains to the potential for 
increased exports of U.S. cattle products to countries that have acted 
to curtail exports since the discovery of the infected cow in 
Washington State in December 2003. However, we are unable to quantify 
the value of such increased exports, because of limits to the data and 
resources available to us. We note however, that USDA assessed this 
category of benefits in the interim final regulation that it issued in 
January 2004. In its assessment, it concluded that ``the 2004 beef 
export demand forecast has been reduced by 90 percent'' (Ref. 26, page 
58). It reported that U.S. exports of beef, veal, and variety meats 
amounted to $3.8 billion in sales in 2003, and exports of live cattle 
resulted in an additional $63 million. The preventive measures 
contained in this proposed rule are expected to increase the likelihood 
that foreign governments ease some restrictions on imports of U.S. beef 
products and cattle.
    Another indirect and incomplete measure of the potential benefits 
of this rule can be seen in measures of the commodities markets' 
reactions to the discovery of BSE cases. When the first BSE case was 
reported in Washington

[[Page 58588]]

State on December 23, 2003, beef prices had risen to record highs, but 
were expected to decline in 2004. After the discovery of the BSE case, 
the 5 area monthly weighted average steer price reported by USDA's 
Agricultural Marketing Service declined by about 14 percent from 
December 2003 to February 2004 (Ref. 30). By April 2004, the weighted 
average monthly price appeared to recover much of the loss. Although 
never fully reaching pre-BSE record levels, prices by mid-2004 appeared 
to be close to what they would have been had the BSE-infected cow not 
been identified. Such volatility in commodities markets may adversely 
affect independent beef producers who are risk averse and have hedged 
against such risks inadequately. To the extent that this proposed rule 
would prevent the development of a BSE-infected cow in the U.S., it may 
provide benefits to such beef producers by reducing their risk of 
financial loss and the cost to them of insuring against such risks.

D. Costs

    We address the costs to industry of complying with this proposed 
regulation by considering in turn each of the individual provisions of 
this proposal. The costs of this proposed rule can be estimated as the 
sum of the costs of the different provisions.
    FDA contracted with ERG to prepare an analysis of the impacts of 
the ban or restriction on use of CMPAF in proposed
    Sec.  589.2001. Additionally, ERG analyzed the likely impacts of 
alternative options (on file at the Division of Dockets Management (see 
ADDRESSES) and henceforth referred to as the Alternatives Report) (Ref. 
31)). In particular, these alternatives include the following: (1) A 
prohibition on the use of specified risk materials in animal feed, (2) 
the requirement for the use of separate facilities or equipment by 
those that process both mammalian protein prohibited in ruminant feed 
and ruminant feeds, and (3) a ban on the use of blood and blood 
products in ruminant feeds. The ERG analysis of this proposed rule 
presents estimates of costs for the meatpacking or slaughtering, 
rendering, and animal producer sectors. In addition, the ERG report 
provides estimates of impacts on representative small firms in the 
sectors that are impacted, to a significant degree, to fulfill 
requirements of a regulatory flexibility analysis. In the development 
of the Alternatives Report, ERG contacted establishments in the FDA 
inspection database that were likely to be affected by these regulatory 
options. Two separate telephone surveys were conducted, covering feed 
mills, renderers, and agricultural product transporters (the latter 
including trucking services at feed mills, renderers, and contract 
haulers). In some cases, written questionnaires were provided to the 
industry members. In addition, ERG used the services of industry 
consultants and other contractors for their technical expertise. The 
sector-specific surveys taken by ERG for the analysis of alternatives 
were each administered to fewer than ten industry members. In its 
development of the report on the proposed rule that would prohibit the 
use of CMPAF in animal feed, ERG again contacted industry members it 
had identified through its previous work on alternative policies, as 
well as industry consultants and industry associations.
    A study prepared for an industry association concluded that about 
35 percent of cattle (42 percent by weight) not inspected and passed 
for human consumption are currently rendered (Ref. 32). Our analysis 
estimated the number of cattle at about 17 percent. Whereas our 
analysis is based on other industry-supplied data that may be less 
dated, the industry analysis is based on USDA/APHIS data, that while 
older, resulted from several different USDA surveys.
    The industry association's analysis differs from our analysis in 
the following three ways: (1) The percentage of animals currently 
rendered, (2) the number of animals, and (3) the weight of prohibited 
cattle material from each animal. Because of these differences, it may 
be potentially misleading to make a direct comparison of the findings 
of the two analyses. For example, if we substitute industry's 
percentages of animals currently rendered into our analysis, our 
estimate increases from 17 percent to 33 percent, but not to the 
industry association's estimate of 35 percent. The slight difference 
between our findings and those of industry (i.e., 33 percent compared 
to 35 percent) should be attributed to the difference in the number of 
animals rendered in each individual category of cattle.
    Aside from the percentage of cattle not inspected and passed for 
human consumption currently rendered, the biggest source of variation 
between the two estimates can be attributed to the assumptions about 
the weight of CMPAF being rendered. The industry analysis assumed that 
the entire carcass would be affected by the ban on cattle not inspected 
and passed for human consumption. Discussions between ERG and industry 
experts convince us that, in most cases, renderers can adequately 
separate CMPAF from the other parts of a carcass. Adjusting the 
industry analysis to include only CMPAF and to include the same number 
of cattle as used in our analysis, decreases their estimate of the 
percentage of tissues rendered from 42 to 33 percent. This contrasts to 
our finding that only 17 percent of the volume of CMPAF from cattle not 
inspected and passed for human consumption is currently rendered.
    Nevertheless, we acknowledge the uncertainty in all of these 
estimates. Due to the significance of this factor in estimating 
compliance costs for this proposed rule, we have adopted the 42 percent 
figure as the upper bound of the acceptable range and include cost 
estimates using this factor, where appropriate, within the cost 
methodology developed in the ERG analysis.
    In general, the proposed ban on the use of CMPAF would impose three 
types of costs. First, it requires firms to buy equipment and to 
reallocate workers to change their production processes. This 
requirement imposes direct costs. Second, it prohibits the use of CMPAF 
by renderers who would use it to produce MBM and tallow. This 
prohibition reduces the revenue to slaughterhouses that sell CMPAF. 
Third, it also may oblige the buyers of MBM to turn to alternative 
ingredients that may be more costly or nutritionally inferior. 
Furthermore, prohibitions on the use of CMPAF in animal feeds can 
impose additional disposal costs, insofar as a previously valuable 
commodity is now turned into an undesirable by-product that requires 
disposal. Thus, we assess the lost revenue, direct costs, additional 
disposal costs, and feed substitution costs that may result from this 
proposed rule.
1. Lost Value of CMPAF
    The proposed rule would prohibit the use of CMPAF in all animal 
feeds. Our analysis concluded that the proposed rule would cause 
slaughtering operations to incur additional capital investment costs 
and labor costs to modify and operate their plants in order to separate 
CMPAF from the rest of the cattle offal. Further, we project the value 
of the MBM and tallow based on historical prices, and discusses 
possible CMPAF or MBM disposal options for the industry. We also 
project the costs of additional disposal of on-farm dead and 
nonambulatory disabled cattle, CMPAF marking costs, recordkeeping, and 
labeling costs required by the proposal.
    ERG used industry data to estimate the CMPAF quantities that would 
be removed from cattle 30 months of age or

[[Page 58589]]

older slaughtered for human food and cattle not inspected and passed 
for human consumption based on various factors including the age of the 
cattle, size of slaughter plant (federal or state inspection 
authority), and, for dead and nonambulatory disabled cattle of any age, 
the type and size of animal (beef or dairy cattle). ERG also used 
industry data on yield to project MBM and tallow production resulting 
from the current level of CMPAF quantities. Using 4-year averages of 
byproduct market prices ($180/ton for ruminant or mixed species MBM, 
and $360/ton for tallow), the annual value of the MBM and tallow 
originating from CMPAF is estimated at $976,000 and $794,000, 
respectively. Using the high end of the range discussed previously, the 
annual value of MBM and tallow would be $1,714,000 and $1,194,000, 
respectively. Additionally, the annual value of the MBM and tallow from 
the carcasses of deads and nonambulatory disabled cattle that would no 
longer be collected by renderers (and would likely be disposed of on 
the farm) is estimated by ERG at $430,000 and $576,000, respectively. 
The high end of this range of costs is estimated at $1,064,000 for MBM 
and $1,422,000 for tallow. The total value of the loss of MBM is 
estimated to range from $1,406,000 to $2,777,000, and the total value 
of the lost tallow is estimated to range from $1,370,000 to $2,616,000. 
The cost of the proposed provision that restricts tallow based on an 
impurity level is addressed in a later section of this analysis.
2. Direct Costs
    There are 5 categories of direct costs, including: (1) Capital and 
labor for slaughtering and rendering, (2) the tallow restriction, (3) 
MS beef restriction, (4) CMPAF marking costs, and (5) labeling and 
recordkeeping costs. We turn to each of these below.
    a. Capital and labor costs--slaughtering and rendering. The 
proposed rule would result in cattle slaughter operations separating 
CMPAF and arranging for its disposal separate from other cattle offal. 
This change in activity may be similar to the new activities required 
by the 2004 USDA interim final rule, pertaining to the prohibition of 
SRM for use in human food. It is likely, however, that SRM segregation 
activities required under the 2004 USDA interim final rule that banned 
SRM from use in human foods would differ to some extent from those that 
would result from this proposed rule. The 2004 USDA interim final rule, 
for example, would allow SRMs that are no longer available for human 
consumption to go to rendering for processing into MBM and tallow for 
use in feed for non-ruminant animal species. Under the FDA proposal, 
the CMPAFs (which are a small subset by volume of SRMs) could not be 
used in any animal feeds. Therefore, slaughterers would need to use 
separate offal lines for offal of non-CMPAF-origin and offal of CMPAF-
origin.
    For projected capital investment and labor, because of the 
relatively small volume of CMPAF per plant, and current high rate of 
brain and spinal cord removal, the rule should result in only modest 
compliance costs. After consulting with slaughter operations, ERG 
projected that all slaughter facilities would need additional offal 
bins designated solely for CMPAFs. Additionally, modifications of 
processes and procedures would be necessary for those slaughter 
facilities that handle larger volumes of animals. These offal bin and 
modification estimates ranged from only $150 for the smallest 
facilities up to $15,000 for the two largest operations in the United 
States. Aggregate one-time capital expenditures are estimated to be 
about $555,000, or about $79,000 annually (based on a 7-percent 
discount rate over 10 years).
    Additional labor costs would be incurred at slaughtering facilities 
to handle CMPAF segregation and disposal. ERG, using its discussion 
with industry members, estimated that the smallest facilities would 
incur no additional labor costs, while the level of additional labor 
would range from only a few minutes at the next smallest facilities to 
slightly more than one production worker at the largest establishments. 
Based on the average pay for this worker of $20,420 (plus a 40 percent 
increase for benefits), ERG estimated the additional labor costs for 
this industry at $597,000. Per facility labor costs are expected to 
range from $313 annually for the smallest plants to $30,000 annually 
for the largest plants. Total capital and labor costs for slaughtering 
facilities are estimated at $676,000 ($597,000 in labor costs plus 
$555,000 annualized at 7 percent over 10 years; annualizing at 3 
percent would reduce the cost by about $14,000 annually).
    Renderers would also incur additional capital and labor costs to 
handle CMPAF segregation from cattle not inspected and passed for human 
consumption. After consulting an equipment manufacturer, ERG projected 
the cost of equipment purchases and installation for renderers based on 
the size of the operation. These costs ranged from about $7,300 at the 
smallest rendering operations to about $72,000 for the largest 
operations. Total capital costs for renderers are estimated at $3.1 
million (annualized at $442,000 over 10 years at a 7-percent discount 
rate, or at $486,000 with a 10 percent maintenance cost included). 
Using the upper end of the range of cattle not inspected and passed for 
human consumption that are currently rendered, we estimate the capital 
costs for renderers at about $7.67 million (annualized at $1.09 million 
over 10 years at a 7 percent discount rate, or at $1.20 million with a 
10 percent maintenance cost).
    Renderer labor costs would also increase due to the CMPAF 
separation, segregation and disposal. Using the same labor rates as 
slaughterers, ERG projected that the additional labor would range from 
slightly over $1,000 at the smallest facility to about $56,500 at the 
largest facilities. The low end of the range of total incremental 
payroll costs at renderers are estimated at about $1.4 million 
annually. The high end of the range of annual labor costs is estimated 
at $3.5 million. Although no labor overhead is included, we believe it 
would be negligible because most facilities would hire less than one 
additional laborer. Total capital and labor costs at rendering 
establishments are projected to range from about $1.88 million to 
$3,938,000 annually ($1.4 million to $3.5 million in labor costs plus 
$486,000 in capital costs after annualizing at 7 percent over 10 years; 
annualizing at 3 percent would reduce costs by about $78,000).
    b. Tallow restriction. The proposed rule would ban the use of 
tallow derived from the brains and spinal cords of cattle 30 months of 
age or older, the brains and spinal cords of all cattle not inspected 
and passed for human consumption, and the entire carcass of cattle not 
inspected and passed for human consumption, if the brains and spinal 
cords are not removed. An exception to this ban is provided for tallow 
from these sources that has no more than 0.15 percent insoluble 
impurities. We do not believe, however, that it would be economical for 
renderers or tallow manufacturers to further process the brains and 
spinal cords from these animals into tallow while complying with the 
proposed equipment separation and tallow purification requirements. We 
have, therefore, not included additional costs for this proposed 
provision. The lost value of this tallow (and MBM) has already been 
accounted for earlier in this analysis.
    c. MS beef restriction. We do not project any compliance costs for 
the proposed MS beef provision. The proposed rule would prohibit the 
use of

[[Page 58590]]

MS beef from use in animal feeds if the brain and spinal cord of cattle 
30 months of age or older, the brain and spinal cord of all cattle not 
inspected and passed for human consumption, or the entire carcass of 
cattle not inspected and passed for human consumption has not been 
previously removed from the cattle material used to make MS beef. USDA 
and FDA have already banned MS beef from use in human food. Through 
contacts with industry members, the analysis projected that about 20 
firms, about one-half of which are renderers, would be affected by this 
proposed provision. These businesses, known as ``4D'' firms, collect 
dead and downer (nonambulatory disabled) cattle and sell the meat to 
pet food manufacturers, zoos and other animal feeding operations. The 
number of pet food manufacturers using this MS beef as an input has 
been declining in recent years, however, due to public perceptions 
concerning pet food inputs. The analysis assumes many of these firms 
use mechanical separation equipment as part of their operation. Census 
data does not separately estimate the sales volume of red meat from 4D 
animals and MS beef from 4D animals. ERG estimated the size of the 
market at about $100 million per year, based on an industry contact. 
Further, the analysis estimated that 75 percent of the value of this 
product is generated from revenues unrelated to the animal or carcass 
pick-up fees. Of this 75 percent, about 20 percent to 25 percent is 
believed to represent MS beef sales. Industry contacts report that the 
brain and spinal cords of dead and downer cattle are already removed 
prior to any mechanical separation of muscle tissue, thereby negating 
the need of further compliance efforts. We invite public comment and 
analysis of the proposed rule's expected impact on 4D animals and 
current 4D industry practices related to MS beef.
    d. CMPAF marking costs. The proposed rule would require that 
renderers that handle CMPAF or products containing CMPAF mark this 
material or product so that it can be identified by visual inspection. 
The analysis determined that the use of dyes would most likely be used 
as the marking agent. Although the industry lacks experience with the 
use of these dyes, it is believed to be a relatively simple process 
that would be performed at the end of the rendering process. Using a 
range of current dye costs, ERG estimated total industry compliance 
costs of this requirement to be from about $1,700 to $13,000 per year. 
At the high end of the range of cattle not inspected and passed for 
human consumption, compliance costs of this provision would range from 
about $2,200 to $16,000 per year.
    e. Labeling and recordkeeping/access costs. The proposed rule would 
require additional measures be taken by renderers that handle CMPAF or 
products containing CMPAF to ensure that the prohibited materials are 
not used in animal feed. The proposed requirements include labeling the 
material ``Do not feed to animals'', establishing and maintaining 
records sufficient to track cattle materials prohibited in animal feed 
to ensure such material is not introduced into animal feed, and making 
such records available to FDA. The proposed rule would also require 
renderers that handle any cattle materials to establish and maintain 
records sufficient to ensure that materials rendered for use in animal 
feed do not contain CMPAF. ERG judged that the proposed labeling and 
recordkeeping requirements would result in modest additional costs to 
all renderers. Although past FDA rulemakings have shown that labeling 
requirements can impose a substantial cost on industry, the analysis 
assumed that this rulemaking's simple new labeling requirements 
(applying primarily to bulk shipments) could be incorporated into 
current labeling practices. We solicit comment on this assumption. 
Likewise, any recordkeeping rules would only require incremental 
administrative activities (to modify procedures and periodically review 
and file) beyond current renderer recordkeeping requirements. Total 
industry costs are estimated at about $62,000 annually (one-time costs 
of $101,000 annualized at 7 percent over 10 years plus annual costs of 
$48,000). We anticipate that records access costs would be negligible. 
We invite public comment on the projected level of effort by industry 
and estimated compliance costs of the proposed labeling and 
recordkeeping/access requirements.
3. Disposal Costs
    After separation from the material allowed to be used in animal 
feed, an estimated 64.3 million lbs. of CMPAF would no longer be 
rendered for use in animal feeds, and therefore would need to go to 
disposal. The analysis identified five options for the disposal of 
these SRMs. These options include landfilling of the CMPAFs without 
rendering, rendering for disposal, disposal through alkaline hydrolysis 
digesters, incineration, and composting. Due to the relatively small 
volume of CMPAFs, rendering for disposal option would likely not be 
economically viable. Contacts with industry members elicited various 
responses concerning the disposal method that would be employed under 
the CMPAF scenario. While landfilling the CMPAF may be a possibility in 
some areas, other states do not allow the disposal of animal carcasses 
in landfills. Our analysis concluded that landfilling would likely be 
one of several methods used to dispose of the CMPAFs.
    Based on industry information gathered for both this analysis (the 
CMPAF option) and the Alternatives Report, ERG estimated the disposal 
costs at $12 per 100 lbs. (cwt) of CMPAF. This is substantially higher 
than its estimate in the Alternatives Report of the cost of SRM 
disposal. Higher per cwt transportation costs (which are included in 
the $12 per cwt estimate) are expected under the CMPAF scenario than 
under the SRM alternative due to the much smaller volume of materials 
requiring disposal under the CMPAF option. Other reasons for the higher 
disposal cost rate include the uncertainty in the disposal methods that 
will be used, and limited industry experience with at least some of 
these methods. This led ERG to project a conservative estimate that 
fully accounts for some uncertainty in cost factors. It is possible 
that future industry efficiency in CMPAF disposal under any of the 
disposal methods would lead to a reduction in projected $12 per cwt 
disposal cost. Nevertheless, the 64.3 million lbs. of CMPAF that would 
result under this proposed rule is estimated to result in $7.72 million 
in disposal costs ($6.19 million to slaughterers and $1.53 million to 
renderers). Using the 42 percent estimate of cattle not inspected and 
passed for human consumption, we estimate that the 83.1 million lbs. of 
CMPAF would result in disposal costs of about $9.97 million annually.
    Cattle producers are also expected to incur additional disposal 
costs for cattle not inspected and passed for human consumption in the 
form of an increase in on-farm disposals. An increase in pick-up fees 
for cattle not inspected and passed for human consumption due to the 
slight loss in value of the rendered MBM would likely cause some of 
these animals to be disposed of at a lower cost (than the pickup fee) 
to the producer by burial on the farm. As previously discussed, our 
analysis estimated that about 17 percent of all cattle not inspected 
and passed for human consumption are currently rendered. Additionally, 
it predicted that about 26,000 less cattle (0.6 percent of all cattle 
not inspected and passed for human consumption, or about 3.5 percent of 
all cattle not inspected and

[[Page 58591]]

passed for human consumption that are rendered) would be disposed of in 
this manner, comprised of beef cows (no additional feedlot cattle 
included) and cattle under 500 lbs (calves). ERG estimates of the 
incremental labor and equipment cost of this activity sum to $1.02 
million annually. Using the 42 percent estimate of cattle not inspected 
and passed for human consumption and the same 3.5 percent relative 
change in the reduction in renderer pick-ups of cattle not inspected 
and passed for human consumption, we project that at the high end of 
the range about 64,000 additional cattle would no longer be rendered, 
at a disposal cost of about $2.53 million.
    In forecasting the change in percentages to be disposed on-site, 
the analysis considered in qualitative terms all factors in the formula 
renderers use to determine whether they will make pickups. These 
factors include the travel distance to the location and the expected 
quantities of animals to be recovered at the location. All pickup 
charges vary over time with the value of meat and bone meal and tallow, 
so pickup patterns are subject to market-driven price changes that are 
addressed in the agreements between renderers and dead animal 
suppliers.
    The analysis also considered that exclusions of prohibited 
materials reduced the prospective value of the animals to be recovered. 
Further, the potential latitude for renderers to increase fees was 
considered, although renderers were fairly tentative in their own 
forecasts of whether and how much they might increase pickup charges in 
response to a potential new regulation.
    ERG also considered that many relatively remote locations had 
already been excluded from renderer pickups due to price and regulatory 
changes over the past ten years. Thus, remaining pickup locations were 
likely to have reasonably favorable characteristics, although 
presumably some locations remained marginal in terms of the existing 
market economics. The data in Table 2-1 of the ERG report (market 
prices of rendered materials, and MBM and tallow yields) and data on 
animal weights was used to consider the value of the dead animal to the 
renderer.
    The final forecast of the response in pickups is the judgment of 
the apparent significance of the regulatory change to the economics of 
the renderer pickups. Because the brain and spinal cord exclusion 
affected a relatively small portion of the animal carcass for 
nondecomposed animals, it followed that the effect on rendering 
economics was similarly fairly modest. The analysis concluded that the 
prohibition of these materials would not trigger wider, rippling 
effects through the renderers' situation.
    While there was considerable data about market prices for rendered 
products and other aspects of pickup economics, data on the 
distribution of relative costs among dead animal suppliers across the 
United States was lacking. Such data would have been needed to make a 
more rigorous forecast of the likely changes in rendering pickup 
patterns. Given the dominating importance of local economic 
considerations in rendering economics, even a national distribution of 
such data would have been of uncertain value to the estimation process.
    The industry association report (Ref. 32) (submitted in response to 
the 2004 ANPRM seeking comment on a more restrictive full SRM ban in 
animal feed) asserts that there would be no incentive to pick-up cattle 
not inspected and passed for human consumption if it is banned from 
animal feed absent exorbitant fees. While this proposed rule would not 
ban all tissues from cattle not inspected and passed for human 
consumption, we acknowledge some uncertainty in the response by 
renderers in this area due to this proposed rule. We request comment on 
the number and percent of cattle not inspected and passed for human 
consumption that are currently rendered, as well as the expected number 
of additional cattle that would be disposed of on farms or elsewhere 
due to this proposed rule, and the costs of this activity.
4. Feed Substitution Costs
    In both FDA's proposed and final rules concerning the prohibition 
on the use of mammalian proteins in ruminant feeds in 1997, the agency 
included the cost of feed that would be substituted for the MBM that 
would be prohibited from use in ruminants. The same issue arises with 
the proposed rule's creation of a list of CMPAFs that would be 
prohibited from use in animal feeds. Animal feed manufacturers would 
substitute other protein sources for the MBM that was previously 
manufactured from CMPAF.
    In the analysis prepared for the 1997 rule banning the use of 
mammalian protein in ruminant feeds, the agency assumed a $31.76 per 
ton price increase ($38.33 adjusted to expected 2005 dollars by the 
average of general inflation from 1997 through 2004) for the substitute 
material, in this case soybean meal, as well as additional minerals 
that would be required to provide the same nutritional level as MBM. We 
accept this as a conservative estimate of the long-term price 
differential. The price differential between the two varies constantly 
based on the weather, feed ingredient imports, slaughter rates, and 
other factors. Since January 2004, soybean meal has been priced from 
$58/ton below MBM to $55/ton above MBM (Ref. 33).
    We cannot predict the future price differentials between the two 
feed substitutes, but accept the previous number of $38.33/ton as a 
reasonable current estimate. Applying this feed cost increase over the 
7,800 tons of MBM that would not be created as a result of this 
proposed regulation as calculated by ERG, results in $299,000 in 
additional feed costs. Using the high end estimate of the number of 
cattle not inspected and passed for human consumption that are 
currently rendered, additional feed costs would amount to about 
$457,000. We invite comment and data on the feed substitution costs 
that this proposed rule would impose.
5. Distribution of Impacts of CMPAF From Cattle 30 Months of Age or 
Older Slaughtered for Human Consumption and Cattle Not Inspected and 
Passed for Human Consumption
    ERG, primarily for the purposes of the Regulatory Flexibility 
Analysis described in more detail below, estimated that a portion of 
the costs to slaughterers will be passed through to consumers and 
animal producers. Similarly, a portion of the costs to independent 
renderers for handling CMPAF from cattle not inspected and passed for 
human consumption will likely be passed back to ranchers, dairy 
farmers, and feedlot operators by way of increased pickup or disposal 
fees. We request public comment and data on the relative size and 
distribution of the likely pass through of the impacts of this 
rulemaking.
    ERG also addressed the relative importance of the loss of MBM due 
to the CMPAF prohibition to both integrated packer/renderers and 
independent renderers. This analysis projected reductions of up to 0.2 
percent of MBM production at independent renderers, while reductions of 
less than 0.1 percent of MBM production would occur at integrated 
slaughterers (packer/renderers)as the low impact estimates. Using the 
high estimate of cattle not inspected and passed for consumption that 
are currently rendered, we project a reduction of up to 0.4 percent of 
MBM production at independent renderers. Independent renderers rely to 
a greater extent on deadstock and, with the January 2004 USDA rule 
banning the use of nonambulatory disabled cattle in

[[Page 58592]]

human food, also on nonambulatory disabled cattle as inputs to their 
production process, while the integrated slaughterers do not.

E. Government Costs

    The proposed rule may require the expenditure of additional funds 
by the Federal government, but the increased expenditures are not 
expected to be significant. The tissues that would be included on the 
list of cattle materials prohibited in animal feed, due to this 
proposed rule, may increase the number of inspections or the length of 
time necessary to inspect an establishment to verify compliance with 
the new proposed requirements. However, the number of establishments 
inspected is not expected to substantially change as a result of this 
proposed rule. All establishments that would be inspected for 
compliance under proposed Sec.  589.2001 would already be subject to 
Sec.  589.2000 or other federal rules. FDA has not estimated any 
additional costs due to this based on the assumption that the 
additional resources would not be significant. We invite comment on the 
issue concerning additional government resources that would be required 
by this proposed rule. ERG's discussions with industry members led to 
the conclusion that no new rendering establishments will be constructed 
and dedicated to disposal rendering as a result of the CMPAF ban. 
Without additional renderer establishments subject to this or other FDA 
regulations, FDA inspection efforts are not expected to noticeably 
increase as a result of this proposed rule.

F. Sensitivity Analysis

    Due to the previously described uncertainty concerning the 
additional cattle not inspected and passed for human inspection that 
would no longer be rendered as a result of this proposed rule, we have 
included a sensitivity analysis around this cost factor. The ERG report 
projected that an additional 0.6 percent of the current 17 percent of 
cattle not inspected and passed for human consumption that are 
currently rendered would not be rendered as a result of this rule and 
would likely be buried on the farm or elsewhere (a relative reduction 
of 3.5 percent (0.006/0.17) of the cattle not inspected and passed for 
human consumption that are currently rendered). Table 3 estimates the 
total costs of the proposed rule for various estimates including the 
original 0.6 percent reduction in the number of cattle not inspected 
and passed for human consumption that are rendered, as well as 
reductions of 1 percent and 2 percent (representing relative reductions 
of 5.8 percent (.01/.17) and 11.6 percent (.02/.17), respectively). 
High end cost estimates (derived from the 42 percent estimate of the 
number of cattle not inspected and passed for human consumption that 
are currently rendered) for the same relative percent reductions are 
also included.
    If 42 percent of cattle not inspected and passed for human 
consumption are currently rendered, and that implementation of this 
proposal would cause an additional 2 percent of all cattle not 
inspected and passed for human consumption not to be rendered, then the 
total incremental costs of the rule would rise to about $36 million per 
year. FDA solicits comment on the likely effect of this proposal on the 
percent of cattle not inspected and passed for human consumption that 
is not rendered and on the costs to society of the disposal methods 
likely to be used as an alternative to rendering.

                      Table 3. Sensitivity Analysis
------------------------------------------------------------------------
    Reduction in Percent of Cattle Not Inspected and Passed for Human
              Consumption That are Rendered (Proposed Rule)
-------------------------------------------------------------------------
                               0.6%            1.0%            2.0%
------------------------------------------------------------------------
Total Costs               $14.4--$23.7     $16.2--27.8     $19.8--$36.3
                          million          million         million
------------------------------------------------------------------------

G. Regulatory Flexibility Analysis

1. Small Business Impacts
    The Regulatory Flexibility Act requires agencies to prepare a 
regulatory flexibility analysis if a rule is expected to have a 
significant impact on a substantial number of small entities. The 
discussion in this section, as well as data and analysis contained in 
sections two through four of the ERG report, constitute the agency's 
compliance with this requirement.
    One requirement of the Regulatory Flexibility Act is a succinct 
statement of any objectives of the rule. As stated previously in this 
analysis, with this proposed rule the agency intends to strengthen the 
existing safeguards designed to help prevent the spread of BSE in U.S. 
cattle, as well as further reduce any risk posed to humans from the 
agent that causes BSE.
    The Regulatory Flexibility Act also requires a description of the 
small entities that would be affected by the proposed rule, and an 
estimate of the number of small entities to which the proposed rule 
would apply. Our analysis focused on renderers and animal slaughterers, 
and to a lesser extent on 4D firms. Additionally, the Alternatives 
report addresses possible impacts to small dairy farms from the blood 
products alternative, and impacts to feed mills from the dedicated 
equipment/facilities alternative (options summarized in the 
alternatives section of this document).
    Animal slaughterers would be classified in the North American 
Industrial Classification System (NAICS) under code 311611--Animal 
(Except Poultry) Slaughtering and renderers under NAICS code 311613--
Rendering and Meat Byproduct Processing. The Small Business 
Administration (SBA) classifies slaughterers and renderers with less 
than 500 employees as small businesses.
    The ERG study estimated the number of small businesses that would 
be affected by the proposed rule in its analysis of compliance costs. 
The number of slaughterers and renderers affected by the CMPAF ban 
(including recordkeeping/labeling and marking costs) were estimated at 
689 and 141, respectively. This would include all federally inspected 
slaughter plants and the all those renderers that handle mammalian 
proteins that are currently prohibited in ruminant feed. Using U.S. 
Census and USDA data, ERG then distributed the number of affected 
entities in each business sector across the size classes of 
establishments using the same proportions as those presented in the 
total number of establishments. Using this distribution, it appears 
that about 97 percent of slaughterer establishments and all renderer 
establishments would be considered small businesses. However, the 
existence of many multi-establishment rendering and slaughtering firms 
would tend to overestimate the number of small businesses within each 
sector. In fact, other Census data shows that only 79 percent of 
rendering firms would be considered small businesses (Ref. 34). 
Nevertheless, we believe that the number of affected small businesses 
in

[[Page 58593]]

both sectors would still be considered substantial.
    The CMPAF ban would primarily affect slaughterers and renderers. 
ERG used its Small Business Impact Model (SBIM) to predict net income 
and closure impacts for slaughterers and renderers by size of 
establishment (for a full explanation of the SBIM, see section 4.2 of 
the Alternatives report (included in the docket (Ref. 31)). The model 
assumes there is no pass through of compliance costs. Although this is 
a conservative assumption, smaller businesses in fact are probably less 
able to pass through compliance costs than larger businesses in the 
same industry, all other things equal. Under the no pass through 
assumption, the model predicts moderate net income impacts that could 
result in the closure of up to one slaughtering and one rendering 
establishment. We acknowledge that net income impacts would likely be 
higher under the higher estimate of the percent of cattle not inspected 
and passed for human consumption that are currently rendered.
    Our analysis for simplicity ignores any potential increases in MBM 
prices that may ensue as a result of this proposed rule. In fact, some 
modest price increases may occur as foreign demand for MBM increases in 
response to reduced risk of BSE infectivity. Such price increases may 
mitigate any reduction in net income of independent renderers.
    ERG developed a separate market model to estimate the impact of a 
CMPAF ban on beef prices and output. It implies that about 50 percent 
of compliance costs will be passed on to consumers, 38 percent will be 
passed back to cattle producers, and 12 percent will be incurred by 
slaughterers. The model predicts that cattle producers would realize 
only a 0.01 percent reduction in price for cattle, which would not be 
considered a significant impact. Nevertheless, the agency acknowledges 
the possibility of significant impacts on a substantial number of small 
slaughterers and renderers.
    The agency believes that the annual feed substitution costs (from 
about $300,000 to $457,000) would not constitute a significant impact 
when spread across the thousands of non-ruminant animal producers that 
currently use ruminant protein in animal feeds. The agency requests 
comments and additional data on the likely small business impacts on 
slaughterers, renderers, beef cattle producers, dairy cattle producers, 
or other animal producers and firms in related industries.
2. Analysis of Alternatives
    We considered five other measures that are not included in this 
proposed rule. These five measures, discussed in turn in the following 
paragraphs, include: (1) A requirement that those facilities handling 
both mammalian protein that is currently prohibited in ruminant feed 
and ruminant feeds use dedicated facilities or equipment for each, (2) 
a ban on the use of poultry litter in ruminant feeds, (3) a ban on the 
use of blood and blood products in ruminant feeds, (4) a ban on the use 
of plate waste in ruminant feeds, and (5) a ban on the use of a larger 
list of SRM (using the USDA and FDA definition for human food) from all 
animal feeds.
    a. Dedicated facilities/equipment requirement. As mentioned 
previously in this preamble, FDA considered requiring that those 
facilities that process or otherwise handle both mammalian protein 
currently prohibited in ruminant feed and prepare feed or feed 
ingredients for ruminants use separate facilities or equipment in order 
to prevent cross-contamination. This option was included in the public 
announcement concerning agency intentions in January 2004. The proposed 
rule's dedicated equipment requirement concerns the issue of cross-
contamination of CMPAFs with other cattle material once it has been 
separated, whereas the requirement for dedicated equipment/facilities 
under this option concerns cross-contamination of mammalian protein 
currently prohibited in ruminant feeds and ruminant feeds under the 
current mammalian to ruminant feed ban. Due to the large tonnage 
difference between CMPAFs and all animal protein currently being 
rendered, this alternative would result in larger industry impacts than 
would the dedicated equipment requirement concerning CMPAFs alone.
    In its Alternatives Report, ERG projects that this option would be 
expected to reinforce the current trend in which increasing numbers of 
feed mills discontinue the use of mammalian protein currently 
prohibited in ruminant feeds in favor of porcine, avian, or plant-based 
proteins. ERG estimates that only 124 out of more than 5,100 feed mills 
and 41 out of 235 renderers currently produce ruminant feed or feed 
ingredients and handle or process ruminant MBM. Based on its small 
survey of feed mills, ERG estimates that only 27 of these feed mills 
and 4 renderers would invest in dedicated facilities or equipment in 
order to continue or begin to distribute both prohibited materials and 
ruminant feeds or feed ingredients.
    ERG consulted an agricultural architecture and engineering firm to 
prepare cost estimates of investment in dedicated feed mill facilities. 
Based on these estimates and discussions with feed mill operators, ERG 
projects that no new mills would be constructed as dedicated facilities 
to comply with this option, but rather currently operating or idle 
mills would either be renovated or expanded as dedicated facilities, or 
would handle a dedicated line of equipment. The annualized costs of 
these investments for the 27 feed mills were estimated at $6.2 million 
over 10 years at a 7-percent discount rate (at a 3-percent discount 
rate over 10 years, the cost would be $5.1 million per year). The 
effect on the ruminant MBM market caused by the discontinued use by 
those that currently offer it in feeds but would choose not to invest 
in dedicated facilities or equipment would be expected to be small.
    ERG performed a similar survey of some of the 41 renderers that the 
FDA inspection database showed as handling mammalian proteins currently 
prohibited in ruminant feed and produce materials intended for use in 
ruminant feed. The results of this survey indicate that very few 
renderers intend to invest in dedicated facilities. Based on its small 
sample, ERG predicts that only 4 renderers would do so. These were all 
expected to currently have partial separation or dedication 
capabilities in place. Based on discussions with renderer operators 
through this and previous surveys, ERG predicts that the renderers that 
invest in dedicated facilities would spend, on average, about $2 
million each. The total cost of investment in dedicated facilities 
would be $8 million. Annualizing this total over 10 years at a 7-
percent discount rate results in an annual cost of $1.14 million 
($940,000 over 10 years at a 3-percent discount rate).
    The dedicated facilities/equipment requirement would also extend to 
the transportation services for mammalian proteins currently prohibited 
in ruminant feed. Based on another survey of selected feed mills, 
agricultural trucking companies and renderers concerning their current 
transportation of products, ERG determined that agricultural 
transporters would also incur costs as a result of this provision of 
this option. The option implies that renderer delivery trucks that 
carry prohibited MBM, including contract haulers providing this 
service, would no longer be allowed to backhaul ruminant feed or 
ruminant feed ingredients as part of its delivery routine. Due to this

[[Page 58594]]

change in service, ERG estimated a transportation cost increase of 40 
to 80 percent for the 141 rendering facilities that process mammalian 
protein currently prohibited in ruminant feed. Although most of these 
renderers do not handle both mammalian protein currently prohibited in 
ruminant feed and ingredients for feeds for ruminants, they rely on 
transportation services (most likely contractor services) that 
transport both materials, and thus would not be in compliance. These 
transportation cost increases are projected to total $8 to $16 million 
per year for the rendering industry.
    Feed mills would also be expected to incur transportation cost 
increases due to the prohibition under this option on backhauling 
ruminant feeds in trucks that are used to deliver feeds with mammalian 
proteins currently prohibited in ruminant feed. Since backhauling does 
not occur as often in the delivery of feed due to shorter average 
distances between feed mills and animal producers than from renderers 
to feed mills, ERG predicted the transportation cost increases at 25 to 
50 percent for feed mills. Based on ERG's calculation of the quantity 
of feed that would be affected by the proposed rule (4.5 million tons) 
and the average transportation cost per ton of feed ($12.66), total 
transportation cost increases for feed mills were estimated to range 
from $14.2 to $28.4 million per year. These costs would include the 
amortized cost of capital equipment such as additional trucks, as well 
as incremental operating and maintenance costs. These costs would be 
incurred by about 200 feed mills. Again, this number is larger than the 
number of mills that handle both mammalian proteins currently 
prohibited in ruminant feed and ruminant feeds due to the additional 
number of mills that would rely on contract feed haulers that handle 
both materials. ERG acknowledges uncertainty in these estimates due to 
possible changes in mill dedication patterns, the analysis of which 
would have required additional geographic distribution data on feed 
mills and feed types.
    If CMPAFs are banned from use in all animal feeds as proposed in 
this rule, the agency believes that a provision requiring dedicated 
facilities or equipment for those handling mammalian proteins currently 
prohibited in ruminant feed and preparing ruminant feeds would not be 
necessary because this proposed rule is expected to reduce the number 
of ID50s available for use in animal feeds by about 90 
percent. Requiring separate facilities or equipment for mammalian 
proteins currently prohibited in ruminant feed and ruminant feeds would 
not be expected to significantly reduce the risk of feeding prohibited 
proteins to ruminants, because nearly all of the potentially BSE 
infective tissues would be unavailable for use in feeds for any animals 
because of the CMPAF prohibition. Therefore, the risk is minimal that 
the BSE agent would be present even if cross-contamination occurs 
between mammalian protein intended for non-ruminant feed and ruminant 
feeds. The agency requests comment and data on the need for a 
requirement for dedicated facilities/equipment for those facilities 
that handle both mammalian proteins currently prohibited in ruminant 
feed and ruminant feed when a CMPAF ban also exists.
    b. Poultry litter prohibition. The agency also considered a ban on 
poultry litter in ruminant feed. Poultry litter contains bedding 
material, spilled poultry feed, and manure, and is a waste by-product 
of poultry production. Because poultry feed may contain mammalian meat 
and bone meal currently prohibited in ruminant feed, there is a risk 
that cattle fed poultry litter containing spilled poultry feed may be 
exposed to prohibited meat and bone meal through that spilled poultry 
feed.
    This alternative would ban the use of poultry litter in all 
ruminant feed. Its costs would be comprised of both substitution costs 
for the replacement materials needed to provide an equivalent 
nutritional value, and disposal costs if the poultry litter cannot be 
used as an alternative product, such as fertilizer. The risk reduction 
would be the elimination of the possibility of the spread of BSE 
through the recycling of mammalian proteins currently prohibited in 
ruminant feed back into cattle feed through poultry litter including 
the spilled poultry feed containing prohibited mammalian proteins.
    A preliminary risk assessment of poultry litter submitted to the 
agency by an industry member predicted that in its worst-case scenario, 
under the current ruminant feed ban rule, a cow would need to eat 70.1 
tons of litter to be exposed to 1 ID50 (Ref. 35). FDA 
modified some of the assumptions used in this risk assessment and 
predicted what would happen if there was no mixing during the cleanout 
process so that the spilled feed remained concentrated in a small 
portion of the bedding. Under this scenario, a ruminant fed only 
contaminated litter from under the poultry feeders must consume 3.4 
tons to consume 1 ID50. This tonnage is still beyond the 
volume a stocker steer would realistically consume under normal 
circumstances due to its relatively short life. Similarly, dairy cows 
would also not be expected to consume this amount since poultry litter 
is not generally used in feed for lactating dairy cows. Because it 
appears to pose only a small baseline risk of BSE for ruminants, FDA 
currently believes that banning poultry litter from ruminant rations 
would have little or no affect on the human risk while increasing the 
environmental risks of its alternative disposal methods. FDA requests 
comments on this issue.
    Most poultry litter is not used as cattle feed. As an organic 
source of nutrients for plants, it has been applied to farmland for 
years. This practice, however, raised environmental concerns that 
excess nitrogen and phosphorus could leach from the litter and 
contaminate waterways. Since rumen microbes can efficiently metabolize 
poultry litter, feeding litter to cattle provides an alternative use to 
land application that benefits both poultry growers and cattle 
producers. Where poultry and cattle operations overlap, poultry growers 
are willing to sell litter at a price that exceeds the value of any 
alternative use. Cattle producers obtain a feed ingredient for a lower 
price than the next best alternative ingredient in the ruminant ration. 
Banning the use of litter in ruminant feed will likely increase the 
price of rations for ruminant producers and decrease revenues for 
poultry producers. Moreover, if poultry producers must dispose of 
unwanted litter, their operating costs would increase.
    To analyze the impact of the ban on poultry litter on ruminant 
producers, we calculated the per ton price of equivalent cattle rations 
with and without poultry litter. Based on feed ingredient prices in 
March 2004 and using equivalent cattle ration formulations recommended 
by University of Georgia, rations with 38 percent to 53 percent poultry 
litter average about $65 per ton (Ref. 36). Equivalent rations without 
poultry litter average about $80 per ton, or about $15 per ton more 
than the ration with poultry litter. The average cattle fed about 16.5 
pounds of feed daily for 200 days consumes a total of 0.6 tons to 0.9 
tons of litter, depending on the percentage of litter in the ration. 
This suggests that the cost of feed will increase by about $25 per head 
($15 per ton x 200 days per head x 16.5 pounds per day/2,000 pounds per 
ton). The annual supply of poultry litter can potentially feed between 
1.3 million (1.1 million tons of litter / 0.9 tons of litter

[[Page 58595]]

per cow) and 3.2 million cows (2 million tons of litter / 0.6 tons of 
litter per cow). Thus the total cost of feed could increase from $32 
million ($24.75 per cow x 1.3 million cows) to $80 million ($24.75 per 
cow x 3.2 million cows).
    Vertical integration in the poultry industry often results in 
contract growers' contractual responsibility for litter management. For 
many reasons, including regional distribution of poultry producers and 
costly transportation, commodity markets do not handle poultry litter. 
Some poultry producing states have taken the initiative to promote and 
develop an infrastructure for litter markets, including programs to 
match the producers and users of poultry litter; providing 
transportation subsidies, or encouraging informal ``markets'' where 
buyers and sellers can contact each other.
    Alternative uses for poultry litter are being developed, but are 
not widely available currently. With technology developed in the United 
Kingdom, the nation's first poultry litter fired power plant is being 
constructed in Missouri. Research is underway to convert litter into 
activated carbons that can absorb environmental pollution.
    In areas where cattle and poultry production overlap, banning 
poultry litter from ruminant feed may require that growers store 
litter, probably in deep stacking sheds, until alternative uses can be 
identified. If it is not possible to store litter, however, growers may 
need to dispose of surplus litter in landfills. To illustrate the cost 
of a worst-case scenario, disposal of the entire 1.1 million to 2 
million tons of litter would range from $44 million to $160 million 
with disposal fees that range from $40 to $80 per ton.
    Without alternative outlets for litter banned from ruminant feed, 
the total short-run costs might range from $76 million to $240 million. 
Contract growers and ruminant producers, many of whom are small 
entities, would incur these costs. Although the poultry litter 
alternative has not been included in the proposed rule, the agency 
requests comment on the need for a poultry litter ban in ruminant feed 
when a CMPAF ban in all animal feed also exists.
    c. Blood and blood products prohibition. We also considered an 
alternative that would have prohibited the use of blood and blood 
products in ruminant feed. We did not include this option in this 
proposed rule because we could not at this time show any BSE risk 
reduction as a result of such a prohibition, and these products have 
beneficial effects in ruminant feed. This option, if adopted, would 
result in one-time direct costs of about $7 million (annualized at 
$990,000 over 10 years at 7 percent) for relabeling, reformulation and 
reregistration, as well as additional revenue losses for the product 
manufacturers.
    ERG identified and profiled the various blood and blood products 
used in animal nutrition. These products include plasma-based 
therapeutics and feed additives, premium blood-based feed additives and 
commodity blood meal. The prohibition of blood and blood products would 
result in some additional administrative costs to feed mills. It would 
require some mills to reformulate the rations in feeds. Relabeling 
efforts would also be required for some feeds, depending on whether the 
current label identifies specific animal proteins or identifies 
proteins under the broader term ``animal protein products.'' 
Additionally, some of these feeds would need to be reregistered with 
state agencies due to their new labeling, resulting in additional 
administrative cost to the mills.
    ERG prepared cost estimates for each of these activities based on 
FDA database information on feed ban inspections, data from industry-
sponsored reports, an industry journal, and Bureau of Labor Statistics 
data. ERG estimated that about 2,300 feed mills offer some type of 
blood-meal containing feeds, and that these mills have, on average, 
about 44 feed mixes that would require reformulation due to their 
containing blood meal or another ruminant protein that would no longer 
be offered due to a dedicated facilities/equipment requirement. ERG 
prepared this estimate assuming that both a blood product prohibition 
and a dedicated facility/equipment requirement would be proposed. 
Therefore, to the extent that the estimated 44 feed mixes represent not 
those containing blood products but rather another ruminant protein 
that would no longer be available if a dedicated facilities/equipment 
requirement had been created, these costs will be overestimated. Based 
on the various labor rates for mill employees, ERG estimated that 
reformulation efforts would result in a one-time total cost of $2.85 
million. Relabeling costs, including both printing plate preparation 
and additional labor hours, are estimated to result in a one-time cost 
of $2.77 million. Reregistration costs are projected to add another 
one-time cost of $1.34 million. In total, these efforts would result in 
a one-time cost of $6.96 million (average one-time costs per affected 
mill would be about $3,000). Annualized over 10 years at a 7-percent 
discount rate, this equates to $990,000 per year (see table 4 of this 
document).

                                         Table 4.--Administrative Costs
----------------------------------------------------------------------------------------------------------------
           Cost Element                   One-Time Costs (Thousands)          Annualized Costs\1\ (Thousands)
----------------------------------------------------------------------------------------------------------------
Reformulation                                                   $2,853                                   $406
----------------------------------------------------------------------------------------------------------------
Relabeling                                                      $2,771                                   $395
----------------------------------------------------------------------------------------------------------------
Reregistration                                                  $1,340                                   $190
----------------------------------------------------------------------------------------------------------------
Total Costs                                                     $6,963                                   $990
----------------------------------------------------------------------------------------------------------------
\1\Over 10 years at a 7 percent discount rate.

    Along with the compliance costs mentioned previously, this option 
would also result in the loss in value of the blood products 
themselves. ERG's discussions with producers of plasma-based products 
for therapeutic use led to the following conclusion. Most of these 
products would not find an acceptable alternative market, or would do 
so only at a steep price discount, due to their reduced efficacy when 
used in animals other than cattle. Although ERG projected future market 
volumes based on industry contacts, current sales of these products are 
unavailable. Plasma-based feed additives and premium blood-based feed 
additives are not as species-specific and could be shifted to use in 
non-ruminant markets assuming a smaller decrease in price than would 
likely occur with the therapeutic

[[Page 58596]]

products. These products, which could be shifted to use in non-ruminant 
markets, may also incur higher transportation costs because fewer mills 
would be expected to accept any mammalian proteins currently prohibited 
in ruminant feed, that is if the dedicated facilities/equipment was 
also required. Commodity ruminant blood meal, valued at about $41 
million in 2003, would also be expected to lose value due to this 
option. Porcine based blood meal would be expected to increase in 
value. These losses have not been projected.
    At this time, the agency does not have evidence that BSE is 
transmitted to cattle via blood or blood products. Therefore, the 
agency has not proposed that these products be banned from use in 
ruminant feeds in this proposal. The agency requests further comment 
and scientific information on the need to prohibit the use of blood and 
blood products in ruminant feed.
    d. Plate waste prohibition. This alternative would have eliminated 
the current exemption of inspected meat products which have been cooked 
and offered for human food, and further heat processed for feed 
(commonly referred to as plate waste but also including used cellulosic 
food casings) from the current definition of protein derived from 
mammalian tissues. It would ban plate waste from use in ruminant feed.
    As previously mentioned in the preamble to this proposed rule, the 
agency requested comment on questions related to the use of plate waste 
in ruminant feeds in the 2002 ANPRM. These questions focused on the 
extent of plate waste use in ruminant feeds, the composition of plate 
waste and its sources, plate waste processing techniques prior to its 
inclusion in feed, and the adverse and positive impacts for excluding 
plate waste from feed. Although the agency received many comments to 
the 2002 ANPRM, they did not include estimates of usage or regulatory 
impacts that were specific enough to form a foundation for a cost 
analysis of this option. One comment stated that the amount of plate 
waste used in ruminant feed was low. Another comment mentioned that 
substantial tonnages were used in ruminant feed in at least one state. 
A third comment stated that plate wastes from correctional facilities 
in another state were used in ruminant feed. No additional data was 
included to support these statements about the extent of plate waste 
use in ruminant feed. One comment stated that there were six processors 
of plate waste in the United States, but did not list these processors 
or offer any estimate of the use or value of processed plate waste in 
ruminant feed.
    We tried to collect more information on the use of plate waste in 
ruminant feed and any expected impacts from its ban in ruminant feed, 
by contacting all those who commented to the ANPRM about plate wastes. 
The comment that mentioned the use of plate waste from correctional 
facilities offered additional anecdotal data about this practice in one 
state, stating this practice was common in areas that had cattle or hog 
farms located near correctional facilities. It is likely, though, that 
because most or all of this plate waste is not currently further heat 
processed for feed, it would not be exempt from the current feed ban as 
defined in the 1997 ruminant feed final rule. No additional data on 
actual volumes of plate waste was offered. Another state agriculture 
agency that responded to the ANPRM, when contacted for further 
information, also stated that very little, if any, plate waste was 
further heat processed and used in ruminant feeds. Further, earlier 
estimates of significant tonnages of plate waste being used in feeds 
could not be verified by this agency through its investigators in the 
field. The other comments did not respond to our attempts at further 
contact.
    We also requested the assistance of agency personnel with knowledge 
of the ruminant feed industry in estimating the extent of use of plate 
waste in ruminant feeds. Although these agency sources acknowledge that 
the practice exists, we do not have any estimate of its prevalence on a 
national level. According to these agency sources, since plate waste 
(including used cellulosic food casings) is expected to have a 
relatively low nutritional value when used as a supplement in ruminant 
feeds, it would not be used in ruminant feed as a general rule. While 
the agency acknowledges that some plate waste is currently used in 
ruminant feeds, it cannot offer an estimate of this plate waste volume. 
The agency acknowledges there would be incremental disposal costs and 
alternative feed costs, due to a ban on the use of plate wastes in 
ruminant feeds. However, the agency cannot reliably estimate these 
costs at this time.
    The agency has concluded that this additional measure would be 
unnecessary given that measures already implemented by USDA and FDA to 
prohibit SRMs from human food effectively eliminate BSE infectivity 
from plate wastes. The agency requests further public comment on the 
extent of plate waste use in ruminant feeds and the costs such a 
prohibition would impose on any industry members.
    e. SRM prohibition. A final alternative would prohibit the use of a 
more extensive list of cattle materials in any animal feed. These 
materials would include the following: (1) SRMs, (2) The small 
intestine of all cattle, (3) material from cattle not inspected and 
passed for human consumption (including nonambulatory disabled cattle), 
(4) tallow containing more than 0.15 percent insoluble impurities if 
derived from prohibited material, and (5) MS beef. SRMs would be 
defined as the skull, brain, eyes, spinal cord, trigeminal ganglia, 
vertebral column, (excluding the vertebrae of the tail, the transverse 
processes of the thoracic and lumbar vertebrae, and the wings of the 
sacrum) and dorsal root ganglia of all cattle 30 months of age or 
older, plus the tonsils and distal ileum of all cattle regardless of 
age.
    FDA stated in July 2004 that it was considering this alternative, 
and ERG completed a cost analysis of this option. It is available at 
the Division of Dockets Management (see ADDRESSES).
    This alternative would require slaughterers to separate SRMs from 
slaughter cattle, and require renderers and firms that process dead, 
down, disabled, and diseased cattle (cattle not inspected and passed 
for human consumption) to separate all material from such animals from 
the remaining cattle offal produced for eventual use as animal feed. We 
estimate that the separation of these SRMs and material from cattle not 
inspected and passed for human consumption would require about $26.5 
million in one-time capital costs (or $3.8 million annualized at 7 
percent and $3.1 million annualized at 3 percent, over 10 years). We 
estimate that the annual cost of the additional labor to separate SRMs 
from other cattle offal is estimated to cost about $9.2 million 
annually. The analysis projected that SRMs, instead of being rendered 
for animal feed, would most likely be rendered for disposal, based on 
the large amount of banned material this option would generate. To the 
extent that some states would allow landfilling (another relatively low 
cost disposal option), this analysis may overestimate compliance costs. 
Although compliance costs for these activities would be borne initially 
by slaughterers, and are presented as such by ERG, a portion of the 
costs are likely to be passed through to cattle producers and 
consumers. Annual rendering costs, which would include the value of the 
MBM net of the value of the recovered tallow, would range from $24 
million to $88 million at the low estimate of the number of cattle not 
inspected and passed for human consumption that are currently rendered

[[Page 58597]]

to $31 million to $117 million at the high estimate. Additional SRM 
transportation costs would be incurred to move SRMs and cattle not 
inspected and passed for human consumption from slaughterers to 
disposal renderers, and to move nonSRM offal a further distance to 
another renderer due to their current renderer becoming a for-disposal-
only renderer. We estimate these to range from $22 million to $39 
million at the low estimate of cattle not inspected and passed for 
human consumption that are rendered to $33 million--$58 million at the 
high estimate annually. Additionally, the estimated cost to dispose of 
the resulting MBM is estimated at $8 million--$16 million at the low 
estimate and $12 million -$24 million annually at the high estimate. 
Total annualized costs of the prohibition of SRM, cattle not inspected 
and passed for human consumption (as shown in table 4 of this document) 
are estimated to range from $76 million to $161 million at the low end 
of the estimates of cattle not inspected and passed for human 
consumption that are rendered. Using the high estimate, annualized 
costs would range from $102 million to $225 million. FDA expects MBM 
disposal costs to decrease in the future with the development of 
alternative markets for MBM of SRM-origin, but can offer no projections 
of these cost reductions.
    These cost estimates assume the development of a rendering industry 
dedicated entirely to disposal. This industry would earn no fees from 
selling rendered material, but would instead charge slaughterers and 
cattle owners for the disposal of prohibited materials. Information 
submitted to the agency implies that some independent rendering 
establishments would be used as rendering for disposal, contingent upon 
a volume of SRM products that would make disposal rendering profitable. 
It may be possible that some geographic areas would be underserved by 
disposal renderers due to the lack of availability of SRMs and cattle 
not inspected and passed for human consumption, necessary to provide 
the service at a charge that is lower than the cattle producers' 
indirect cost of on-farm disposal of cattle not inspected and passed 
for human consumption. Neither FDA nor ERG has the geographic data on 
renderer locations and offal suppliers, or the financial data on 
individual renderers necessary to predict the number or geographic 
location of rendering establishments that will undertake SRM rendering 
for disposal. Further discussion of the implications for the 
development of a disposal rendering industry is available in the 
environmental assessment of this proposed rule. We request comments and 
data concerning the development of a rendering industry dedicated to 
rendering for disposal only of SRM and cattle not inspected and passed 
for human consumption.
    ERG determined that the prohibition on the use of tallow derived 
from the list of cattle materials prohibited under this alternative 
option that contains more than 0.15 percent hexane-insoluble impurities 
would result in annualized costs estimated at $2. million. These costs 
consist of capital and operating costs for polishing centrifuges that 
would be needed by a small segment of independent renderers (further 
analysis of this provision led ERG to reduce the estimated cost, as it 
reported in its analysis of the proposed rule, to $1.78 million 
annually). The loss in market value of both MS beef and muscle tissue 
from cattle not inspected and passed for human consumption used in 
animal feeds is projected at about $75 million. FDA acknowledges that 
this last estimate is speculative because these sales cannot be 
distinguished from other renderer sales in U.S. Census data. FDA 
invites public comments and data on the impacts of the provisions that 
would prohibit all tallow derived from the prohibited materials that 
contains more than 0.15 percent insoluble impurities and all MS beef 
from use in animal feeds. Total costs of this alternative are estimated 
to range from $154.0 million to $242.6 million annually for the low 
estimate of cattle not inspected and passed for human consumption. 
Using the high estimate, total annualized costs are projected at $178 
million to $302 million Table 5 of this document displays the costs 
associated with this alternative.

                  Table 5.--Total Costs ($ Millions)\1\
------------------------------------------------------------------------
                                                            Annualized
      Cost Item         One-Time Cost     Annual Costs        Costs
------------------------------------------------------------------------
Capital Investments     $27              N/A              $4
------------------------------------------------------------------------
Labor                  ...............   $9               $9
------------------------------------------------------------------------
Net Rendering          ...............   ($25-$88) to     ($25-$88) to
 Costs\2\                                ($31-$117)       ($31-$117)
------------------------------------------------------------------------
SRM Transportation     ...............   ($22-$39) to     ($22-$39) to
                                         ($33-$58)        ($33-$58)
------------------------------------------------------------------------
Disposal Costs         ...............   ($10-$18) to     ($10-$18 to
                                         ($17-$29)        ($17-$29)
------------------------------------------------------------------------
SRM Marking            ...............   ($0.02-$0.15)    ($0.02-$0.15)
                                         to ($0.03-       to ($0.03-
                                         $0.23)           $0.23)
------------------------------------------------------------------------
Recordkeeping/         ...............   $0.05 to $0.06   $0.05 to $0.06
 Labeling
------------------------------------------------------------------------
Feed Substitution      ...............   $6-$7            $6-$7
------------------------------------------------------------------------
Subtotal--Codified     ...............   ($72-$161) to   ($76-$165) to
 SRM, Dead, Downer                       ($96-$220)       ($100-$224)
 Ban
------------------------------------------------------------------------
Tallow Restriction      $11              $1               $2
------------------------------------------------------------------------
MS Beef Ban            ...............   $75              $75
------------------------------------------------------------------------
SRM Alternative Total  ...............  ...............   ($153.0-$242)
 Costs                                                    to ($178-$302)
 
------------------------------------------------------------------------
\1\ Low cost estimate ranges reflect lower estimate of cattle not
  inspected and passed for human consumption. High cost estimate range
  reflect high end of estimates of cattle not inspected and passed for
  human inspection.
\2\ Has been reduced by the value of the tallow products recovered.


[[Page 58598]]

    To assess the risk reduction from the SRM alternative in this 
proposed rule, we use two distinct approaches. In the first approach, 
we assume that the number of new BSE cases is proportional to the 
amount of all infectious material included in feed. Given this 
assumption, we can estimate the percentage reduction in risk as the 
percentage reduction in infectious material.A report by the Scientific 
Steering Committee of the European Union suggests that the tissues 
designated as SRM (brain, spinal cord, trigeminal ganglia, dorsal root 
ganglia, distal ileum, eyes) constitute at least 99.44 percent of the 
total infective load (Ref. 29). These tissues (SRMs) from cattle 30 
months of age and older, the tonsils and distal ileum of all cattle, 
and all material from cattle not inspected and passed for human 
consumption, would be prohibited from use in any animal feed under this 
alternative. SRMs (except for tonsils and distal ileum which are 
prohibited regardless of age of cattle), when taken from cattle less 
than 30 months of age, would not be prohibited from use in all animal 
feed because the probability is very low that tissues from cattle of 
this age would contain BSE infectivity. FDA estimates, therefore, that 
banning SRMs from use in any animal feed would effectively remove about 
99 percent of any remaining infectivity from possible spread through 
the feed system.
    The second approach uses the Harvard-Tuskegee risk assessment 
model, making adjustments to the infectivity pathways for cattle and 
humans that would still be available even after the USDA interim final 
rules concerning SRMs in human food and Advanced Meat Recovery (AMR) 
systems became effective. FDA has updated the model to simulate the 
introduction of five infected cattle into the United States. The model 
was also updated to further reduction in the spread of BSE among cattle 
and reduction in human exposure to cattle oral ID50s that 
would result from a ban on SRMs in animal feeds. The USDA rule, 
prohibiting the use of SRMs in human food as well as the FDA interim 
final rule prohibiting the use of SRMs in human food and cosmetics, may 
cause some offsetting increases in the amount of SRMs that enter non-
ruminant feeds; the proposed SRM ban would address this increase in 
SRMs in animal feed. Under this second approach, we define risk 
reduction as the reduction in human exposure that would result from the 
ban on the use of SRM in any animal feed using the HCRA model. These 
results show that prohibiting the use of SRMs in all animal feed would 
effectively negate about 95 percent of the remaining risk of human 
exposure to cattle oral ID50s. When considered as a 
complementary measure to the USDA and FDA SRM bans for human food, the 
estimate of overall human exposure reduction from those bans and the 
SRM alternative is more than 99 percent.
    The model does not take into account any additional risk reduction 
from the restrictions on the use of tallow or MS beef in animal feeds. 
While we believe these additional restrictions would likely further 
reduce the risk to human health from BSE to a small degree, we cannot 
quantify this risk reduction.
    Compared to the proposed rule, this alternative would impose an 
additional $171 million to $226 million in annual compliance costs. As 
discussed earlier, we believe that this proposed rule provides the 
appropriate level of protection against the spread of BSE in a cost-
effective manner.

V. Paperwork Reduction Act

    This proposed rule contains information collection provisions that 
are subject to review by the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act of 1995 (the PRA) (44 U.S.C. 3501-
3520). A description of these provisions is given below with an 
estimate of the annual recordkeeping burden. Included in the estimate 
is the time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing each collection of information.
    FDA invites comments on the following topics: (1) Whether the 
proposed collection of information is necessary for the proper 
performance of FDA's functions, including whether the information will 
have practical utility; (2) the accuracy of FDA's estimate of the 
burden of the proposed collection of information, including the 
validity of the methodology and assumptions used; (3) ways to enhance 
the quality, utility, and clarity of the information to be collected; 
and (4) ways to minimize the burden of the collection of information on 
respondents, including through the use of automated collection 
techniques, when appropriate, and other forms of information 
technology.
    Title: Substances prohibited from use in animal food or feed.
    Description: We are proposing to amend our regulations to prohibit 
the use of certain cattle origin materials in the food or feed of all 
animals. These materials include the following: (1) The brains and 
spinal cords from cattle 30 months of age and older (2) the brains and 
spinal cords from cattle of any age not inspected and passed for human 
consumption, (3) the entire carcass of cattle not inspected and passed 
for human consumption if the brains and spinal cords were not removed, 
(4) MS beef that is derived from cattle from which prohibited materials 
were not previously removed; and (5) tallow that is derived from cattle 
materials prohibited in animal feed unless such tallow contains no more 
than 0.15 percent insoluble impurities. These measures will further 
strengthen existing safeguards designed to help prevent the spread of 
BSE in U.S. cattle.
    Description of Respondents: Rendering facilities, Medicated feed 
manufacturers and distributors, livestock feeders.

                                                     Table 6.--Estimated Annual Recordkeeping Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Annual
                  21 CFR Section                        No. of       Frequency per   Total Annual      Hours per      Total Hours       Operation and
                                                     Recordkeepers   Recordkeeper       Records      Recordkeeper                     Maintenance Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
589.2001(b)(2)(iv) and (b)(3)(i)                            141               1             141              20           2,820               $47,940
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total                                               ..............  ..............  ..............  ..............        2,820     ....................
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The estimated recordkeeping burden is derived from agency resources 
and discussions with affected industry. The recordkeeping requirement 
in proposed Sec.  589.2001(b)(2)(iv) will apply to the limited number 
of renderers who will handle prohibited bovine material. We estimate 
that no more than 50 rendering firms will be involved in the handling

[[Page 58599]]

of this material. Although we may consider the distribution records 
needed to comply with this proposed regulation ``usual and customary'' 
and thus not subject to PRA, we believe there will be burden associated 
with setting up a system to assure such records are sufficient to 
address the proposed recordkeeping requirement. Likewise, although we 
may consider the records necessary to comply with proposed Sec.  
589.2001(b)(3)(i) as ``usual and customary'' and not subject to PRA 
burden accounting, we are including a burden estimate to cover 
establishment of a system to assure existing receipt and manufacturing 
records adequately address this proposed requirement.
    In compliance with the PRA (44 U.S.C. 3507(d)), the agency has 
submitted the information collection provisions of this proposed rule 
to OMB for review. Interested persons are requested to submit written 
comments on the information collection provisions to the Office of 
Information and Regulatory Affairs, Office of Management and Budget 
(OMB).
    OMB is still experiencing significant delays in the regular mail, 
including first class and express mail, and messenger deliveries are 
not being accepted. To ensure that comments on the information 
collection are received, OMB recommends that written comments be faxed 
to the Office of Information and Regulatory Affairs, OMB, Attn: Fumie 
Yokota, Desk Officer for FDA, FAX: 202-395-6974.

VI. Environmental Impact

    The agency has carefully considered the potential environmental 
impact of this action and has concluded that the action will not have a 
significant impact on the human environment and that an environmental 
impact statement is not required. FDA's finding of no significant 
impact and the evidence supporting that finding, contained in an 
environmental assessment, may be seen in the Division of Dockets 
Management (see ADDRESSES) between 9 a.m. and 4 p.m., Monday through 
Friday.

VII. Federalism

    We have analyzed this proposed rule in accordance with the 
principles in Executive Order 13132. We have determined that the 
proposed rule does not contain policies that have substantial direct 
effects on the states, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Accordingly, 
we have tentatively concluded that the proposed rule does not contain 
policies that have federalism implications as defined in the Executive 
order and, consequently, a federalism summary impact statement is not 
required.

VIII. Comments

    Interested persons may submit to the Division of Dockets Management 
(see ADDRESSES) written or electronic comments regarding this document. 
Submit a single copy of electronic comments or two paper copies of any 
mailed comments, except that individuals may submit one paper copy. 
Comments are to be identified with the docket number found in brackets 
in the heading of this document. Received comments may be seen in the 
Division of Dockets Management between 9 a.m. and 4 p.m., Monday 
through Friday.

IX. References

    The following references have been placed on display in the 
Division of Dockets Management (see ADDRESSES) and may be seen by 
interested persons between 9 a.m. and 4 p.m., Monday through Friday. 
FDA has verified the Web site addresses, but FDA is not responsible for 
any subsequent changes to the Web site after this document publishes in 
the Federal Register.
    1. Kimberlin, R.H. and J.W. Wilesmith, ``Bovine Spongiform 
Encephalopathy: Epidemiology, Low Dose Exposure, and Risks,'' Annals 
of the New York Academy of Sciences, 724: 210-220, 1994.
    2. Collee, J.G. and R. Bradley, ``BSE: A Decade on-Part I,'' 
Lancet, 349: 636-41, 1997.
    3. Harvard Center for Risk Analysis, Harvard School of Public 
Health, and Center for Computational Epidemiology, College of 
Veterinary Medicine, Tuskegee University, ``Evaluation of the 
Potential for Bovine Spongiform Encephalopathy in the United 
States,'' Harvard Center for Risk Analysis Internet Page (http://www.hcra.harvard.edu/pdf/madcow_report.pdf), 2001.
    4. Harvard Center for Risk Analysis, Harvard School of Public 
Health, and Center for Computational Epidemiology, College of 
Veterinary Medicine, Tuskegee University, ``Evaluation of the 
Potential for Bovine Spongiform Encephalopathy in the United 
States,'' Harvard Center for Risk Analysis Internet Page (http://www.hcra.harvard.edu/pdf/madcow.pdf), 2003.
    5. Harvard Center for Risk Analysis, Harvard School of Public 
Health, ``Evaluation of the Potential Spread of BSE in Cattle and 
Possible Human Exposure Following Introduction of Infectivity into 
the United States from Canada,'' accessed online at Harvard Center 
for Risk Analysis Internet Page http://www.hcra.harvard.edu/pdf/canadian/Text_2003_09_05_-_with_refs.pdf, 2003.
    6. U.S. Department of Agriculture, Animal and Plant Health 
Inspection Service (USDA/APHIS), report of the epidemiological 
investigation, ``A Case of Bovine Spongiform Encephalopathy (BSE) in 
the United States,'' March 2004, USDA/APHIS Internet Page (http://www.aphis.usda.gov/lpa/issues/bse/BSE_tr_ban%20_ltr_enc_1.pdf).
    7. Canadian Food Inspection Agency; BSE in North America; Latest 
Information, (http://www.inspection.gc.ca/english/anima/heasan/disemala/bseesb/situatione.shtml).
    8. The transcripts of the October 30, 2001, public hearing on 
BSE, are available at the Division of Dockets Management (refer to 
Docket No. 01N-0423). The transcripts may also be obtained online at 
FDA Internet Page (http://www.fda.gov/ohrms/dockets/dockets/01N-0423/01n0423.htm).
    9. World Health Organization (WHO) Fact Sheet No. 113, Bovine 
Spongiform Encephalopathy, revised Nov. 2002, WHO Internet Page 
(http://www.who.int/mediacentre/factsheets/fs113/en/).
    10. Livestock Mortalities: Methods of Disposal and Their 
Potential Costs. Sparks Companies, Inc., McLean, VA, March 2002.
    11. U.S. Department of Agriculture, Animal and Plant Health 
Inspection Service, USDA's BSE Testing Program, USDA/APHIS Internet 
Page (http://www.aphis.usda.gov/lpa/issues/bse_testing/index.html).
    12. The BSE Inquiry Report, vol. 5, Animal Health, 1989-1996, 
pp. 94-107, A committee report to MAFF, UK. BSE Inquiry Internet 
Page (http://www.bseinquiry.gov.uk/).
    13. Overview of the BSE risk assessments of the European's 
Commission Scientific Steering Committee (SSC) and its TSE/BSE ad 
hoc group, Adopted between September 1997 and April 2003, June 5, 
2003, Europa Internet Page (http://europa.eu.int/comm/food/fs/sc/ssc/out364_en.pdf).
    14. U.S. Food and Drug Administration, Center for Veterinary 
Medicine, Summary of FDA Inspectional Findings and Recalls Involving 
the Ruminant Feed Ban Regulation (21 CFR 589.2000) Conducted in 
Fiscal Year 2004 and First Half of Fiscal Year 2005, September 2005.
    15. Florida Department of Agriculture and Consumer Services and 
Florida Cooperative Extension Service, Institute of Food and 
Agricultural Services, brochure entitled ``The Misuse of Pet Food as 
Feed for Show Cattle--Misconceptions and Realities.''
    16. Scientific Steering Committee, European Commission, ``Update 
on the Opinion of TSE Infectivity Distribution in Ruminant 
Tissues,'' Initially adopted by the Scientific Steering Committee at 
its meeting of January 10 and 11, 2002, and amended at its meeting 
of November 7 and 8, 2002, following the submission of a risk 
assessment by the German Federal Ministry of Consumer Protection, 
Food and Agriculture and new scientific evidence regarding BSE 
infectivity distribution in tonsils, Europa Internet Page (http://europa.eu.int/comm/foods/fs/bse/scientific_advice08_en.html).
    17. SSC Opinion on The Human Exposure Risk (HER) via Food With 
Respect to BSE, Adopted on 10 December 1999; (http://europa.eu.int/comm/food/fs/sc/ssc/out67_en.pdf).
    18. Health and Consumer Protection Directorate-General, European 
Commission, ``Report on the Monitoring and Testing of Ruminants for 
the Presence of Transmissible Spongiform Encephalopathy (TSE) in 
2002.''
    19. Targeted Screening of High-Risk Cattle Populations for BSE 
to Augment Mandatory

[[Page 58600]]

Reporting of Clinical Suspects, Preventive Veterinary Medicine 51:3-
16, 2001.
    20. Taylor, D.M., S.L. Woodgate, and M.J. Atkinson, et al., 
``Inactivation of the Bovine Spongiform Encephalopathy Agent by 
Rendering Procedures,'' Veterinary Record, 137: 605-610, 1995.
    21. Taylor, D.M., S.L. Woodgate, A.J. Fleetwood, et. al., ``The 
Effect of Rendering Procedures on Scrapie Agent,'' Veterinary 
Record, 141: 643-649, 1997.
    22. Wilesmith, J.W., G.A.H. Wells, M.P. Cranwell, et al., 
``Bovine Spongiform Encephalopathy: Epidemiological Studies,'' 
Veterinary Record, 123: 638-644, 1998.
    23. Office International des Epizooties (OIE), Terrestrial 
Animal Health Code, Bovine Spongiform Encephalopathy Chapter, 2005.
    24. U.S. Department of Health and Human Services, Food and Drug 
Administration (FDA), Transcript of meeting of the Transmissible 
Spongiform Encephalopathies Advisory Committee, April 16, 1998, FDA 
Internet Page (http://www.fda.gov/ohrms/dockets/ac/98/transcpt/3406t2.pdf), 1998.
    25. ``Economic Impacts of Proposed FDA Regulatory Changes to 
Regulations of Animal Feeds Due to Risk of Bovine Spongiform 
Encephalopathy,'' Contract No. 223-03-8500, Task Order 3, Eastern 
Research Group, Lexington, MA, July 25, 2005.
    26. ``Preliminary Analysis of Interim Final Rules and an 
Interpretive Rule to Prevent the BSE Agent from Entering the U.S. 
Food Supply,'' USDA, April 7, 2004, FSIS/USDA Internet Page (http://www.fsis.usda.gov/Frame/FrameRedirect.asp?main=/oppde/rdad/frpubs/03-025n/bse_analysis.pdf).
    27. Department of Health and Human Services press release. FDA 
Internet Page (http://www.fda.gov/bbs/topics/news/2004/hhs_012604.html).
    28. European Union Scientific Steering Committee (EU SSC), 
Opinion of December 10, 1999, of the Scientific Steering Committee 
on the Human Exposure Risk (HER) via Food with Respect to BSE, p. 
11, 2001.
    29. United Kingdom Department of Health, 2005, Internet Page 
(http://www.dh.gov.uk/PublicationsAndStatistics/PressReleases/PressReleasesNotices/fs/en?CONTENT_ID=4118691&chk=0Yqdjc).).
    30. U.S. Department of Agriculture, Agricultural Marketing 
Service, Internet Page (http://www.ers.usda.gov/briefing/foodpricespreads/meatpricespreads/beef.xls)
    31. ``Economic Impacts of Alternative Changes to the FDA 
Regulation of Animal Feeds to Address the Risk of Bovine Spongiform 
Encephalopathy,'' Contract No. 223-98-8002, Task Order 2, Eastern 
Research Group, Lexington, MA, July 25, 2005.
    32. ``An Economic and Environmental Assessment of Eliminating 
Specified Risk Materials and Cattle Mortalities from Existing 
Markets,'' Prepared for the National Renderers Association by 
Informa Economics, Inc. Washington, D.C. http://www.renderers.org/economic_impact/index.htm
    33. Feedstuffs, vol. 77, No. 3, p. 21, January 17, 2005.
    34. U.S. Small Business Administration data at the U.S. Census 
Bureau Internet Page (http://www.census.gov/csd/subsb/usalli01.xls).
    35. North American Rendering Industry submission to docket 
number 02N-0273, comment 30, February 3, 2004.
    36. The University of Georgia, College of Agricultural and 
Environmental Sciences, Cooperative Extension Service, AS-1 
Newsletter, p. 5, January/February 2001.

List of Subjects in 21 CFR Part 589

    Animal feeds, Animal foods, Food additives, Incorporation by 
reference.
    Therefore, under the Federal Food, Drug, and Cosmetic Act and under 
authority delegated to the Commissioner of Food and Drugs, the Food and 
Drug Administration, it is proposed that 21 CFR part 589 be amended to 
read as follows:

PART 589--SUBSTANCES PROHIBITED FROM USE IN ANIMAL FOOD OR FEED

    1. The authority citation for 21 CFR part 589 continues to read as 
follows:

    Authority:  21 U.S.C. 321, 342, 343, 348, 371.
    2. Section 589.2000 is amended by revising paragraph (a)(1) and by 
adding paragraphs (c)(4) and (e)(3) to read as follows:


Sec.  589.2000   Animal proteins prohibited in ruminant feed.

    (a) * * *
    (1) Protein derived from mammalian tissues means any protein-
containing portion of mammalian animals, excluding: Blood and blood 
products; gelatin; tallow containing no more than 0.15 percent 
insoluble impurities and tallow derivatives as specified in Sec.  
589.2001; inspected meat products which have been cooked and offered 
for human food and further heat processed for feed (such as plate waste 
and used cellulosic food casings); milk products (milk and milk 
proteins); and any product whose only mammalian protein consists 
entirely of porcine or equine protein.
* * * * *
    (c) * * *
    (4) Renderers shall comply with all applicable requirements under 
Sec.  589.2001.
* * * * *
    (e) * * *
    (3) Renderers shall comply with all applicable requirements under 
Sec.  589.2001.
* * * * *
    3. Section 589.2001 is added to read as follows:


Sec.  589.2001   Cattle materials prohibited in animal food or feed.

    (a) Definitions--(1) Cattle materials prohibited in animal feed 
include:
    (i) The brains and spinal cords of cattle 30 months of age and 
older;
    (ii) The brains and spinal cords of cattle not inspected and passed 
for human consumption as defined in paragraph (a)(2) of this section;
    (iii) The entire carcass of cattle not inspected and passed for 
human consumption from which brains and spinal cords were not removed;
    (iv) Mechanically separated beef as defined in paragraph (a)(3) of 
this section that is derived from materials specified in paragraphs 
(a)(1)(i), (a)(1)(ii), and (a)(1)(iii) of this section; and
    (v) Tallow as defined in paragraph (a)(5) of this section that is 
derived from materials specified in paragraphs (a)(1)(i), (a)(1)(ii), 
and (a)(1)(iii) of this section. Cattle materials prohibited in animal 
feed do not include:
    (A) Tallow derivatives as defined in paragraph (a)(6) of this 
section and;
    (B) Tallow as defined in paragraph (a)(5) of this section that is 
derived from materials specified in paragraphs (a)(1)(i), (a)(1)(ii), 
and (a)(1)(iii) of this section and that contains no more than 0.15 
percent insoluble impurities. Insoluble impurities must be measured by 
the method entitled ``Insoluble Impurities'' of the American Oil 
Chemists' Society (Official Method Ca 3a-46), or another method 
equivalent in accuracy, precision, and sensitivity to AOCS Official 
Method Ca 3a-46. The Director of the Office of the Federal Register 
approves this incorporation by reference in accordance with 5 U.S.C. 
552(a) and 1 CFR part 51. You may obtain copies of the method from the 
AOCS (http://www.aocs.org). Copies may be examined at the Center for 
Food Safety and Applied Nutrition's Library, 5100 Paint Branch Pkwy., 
College Park, MD 20740, or at the National Archives and Records 
Administration (NARA). For information on the availability of this 
material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.
    (2) Cattle not inspected and passed for human consumption means 
cattle of any age that were not inspected and passed for human 
consumption by the appropriate regulatory authority. This term includes 
nonambulatory disabled cattle. Nonambulatory disabled cattle are cattle 
that cannot rise from a recumbent position or that cannot walk, 
including, but not limited to, those with broken appendages, severed 
tendons or

[[Page 58601]]

ligaments, nerve paralysis, fractured vertebral column, or metabolic 
conditions.
    (3) Mechanically separated beef means a finely comminuted meat food 
product, resulting from the mechanical separation and removal of most 
of the bone from attached skeletal muscle of cattle carcasses and parts 
of carcasses.
    (4) Renderer means any firm or individual that processes slaughter 
byproducts, animals unfit for human consumption, or meat scraps. The 
term includes persons who collect such materials and subject them to 
minimal processing, or distribute them to firms other than renderers 
(as defined in this paragraph) whose intended use for the products may 
include animal feed, industrial use, or other uses. The term includes 
renderers that also blend animal protein products.
    (5) Tallow means the rendered fat of cattle obtained by pressing or 
by applying any other extraction process to tissues derived directly 
from discrete adipose tissue masses or to other carcass parts and 
tissues.
    (6) Tallow derivative means any product obtained through initial 
hydrolysis, saponification, or trans-esterification of tallow; chemical 
conversion of material obtained by hydrolysis, saponification, or 
trans-esterification may be applied to obtain the desired product.
    (b) Requirements. (1) No animal feed or feed ingredient shall be 
manufactured from, processed with, or otherwise contain, cattle 
materials prohibited in animal feed as defined in paragraph (a)(1) of 
this section.
    (2) Renderers that manufacture, process, blend, or distribute 
cattle materials prohibited in animal feed as defined in paragraph 
(a)(1) of this section, or products that contain or may contain cattle 
materials prohibited in animal feed, shall take the following measures 
to ensure that materials identified in paragraph (b)(1) of this section 
are not introduced into animal feed:
    (i) Once cattle materials prohibited in animal feed have been 
separated from other cattle materials, provide for measures to avoid 
cross-contamination;
    (A) Use separate equipment while handling cattle materials 
prohibited in animal feed; or
    (B) Use separate containers that adequately prevent contact with 
animal feed, animal feed ingredients, or equipment surfaces;
    (ii) Label the cattle materials prohibited in animal feed and 
products that contain or may contain cattle materials prohibited in 
animal feed in a conspicuous manner as follows: ``Do not feed to 
animals'';
    (iii) Mark the cattle materials prohibited in animal feed and 
products that contain or may contain cattle materials prohibited in 
animal feed with an agent that can be readily detected on visual 
inspection; and
    (iv) Establish and maintain records sufficient to track cattle 
materials prohibited in animal feed to ensure such material is not 
introduced into animal feed, and make the records available for 
inspection and copying by the Food and Drug Administration.
    (3) Renderers that manufacture, process, blend, or distribute any 
cattle materials shall take the following measures to ensure that 
materials identified in paragraph (b)(1) of this section are not used 
in animal feed:
    (i) Establish and maintain records sufficient to demonstrate that 
material rendered for use in animal feed was not manufactured from, 
processed with, or does not otherwise contain, cattle materials 
prohibited in animal feed, and make the copies available for inspection 
and copying by the Food and Drug Administration; and
    (ii) Comply with all applicable requirements under Sec.  589.2000 
regarding animal proteins prohibited in ruminant feed.
    (c) Adulteration and misbranding. (1) Failure of a renderer to 
comply with the requirements in paragraphs (b)(2)(i), (b)(2)(iii), 
(b)(2)(iv), or (b)(3)(i) of this section will render the animal feed or 
feed ingredients adulterated under section 402(a)(4) of the Federal 
Food, Drug, and Cosmetic Act (the act).
    (2) Animal feed or feed ingredients that are not in compliance with 
paragraph (b)(1) of this section are adulterated under section 
402(a)(2), 402(a)(3), or 402(a)(5) of the act.
    (3) Animal feed or feed ingredients that are not in compliance with 
the labeling requirements of paragraph (b)(2)(ii) of this section are 
misbranded under section 403(a)(1) or 403(f) of the act.
    (4) Failure of a renderer to comply with the requirements in 
paragraph (d) of this section will render the animal feed or feed 
ingredients adulterated under section 402(a)(4) of the act.
    (d) Inspection; records retention. Records required to be made 
available for inspection and copying by the Food and Drug 
Administration, as required by this section, shall be kept for a 
minimum of 1 year.

    Dated: July 26, 2005.
Jeffrey Shuren,
Assistant Commissioner for Policy.
[FR Doc. 05-20196 Filed 10-4-05; 1:00 pm]
BILLING CODE 4160-01-S